The effects of ESG activities on firm performance: evidence from the BRICS

Abstract

This study aims to analyze the individual effects of environmental, social and governance (ESG) components on the performance of companies from BRICS countries (Brazil, Russia, India, China and South Africa) during the period from 2010 to 2023. The sample consists of 12,750 companies from 2010 to 2023. A multilevel regression model was employed to capture the influence of variables at different analytical levels. The results reveal that practices related to emissions management, diversity, inclusion and employee well-being have positive and significant impacts on return on assets and return on equity. Corporate governance, especially shareholder protection mechanisms, also proved to be a key factor in improving performance. On the other hand, investments in innovation and resource use showed negative effects on short-term performance. It was observed that larger firms face greater challenges in converting ESG practices into immediate market value. The paper provides insights for managers by reinforcing the strategic importance of integrating ESG practices, particularly those related to human capital and governance, to enhance firm performance. The findings also offer practical implications for investors by identifying ESG dimensions associated with sustainable corporate growth in BRICS countries. The study highlights the role of diversity and employee well-being in promoting more equitable corporate environments, reinforcing sustainability as a driver of organizational transformation in emerging markets. The originality of the study lies in the combination of a multilevel approach with a comparative analysis among emerging economies, filling gaps in the literature on corporate sustainability in developing countries.