WEIGHING very little discussion about its impact in the
financial profitability of investment firms.
SUSTAINABILITY AGAINST Most studies about ESG-criteria in relation
PROFITABILITY to investment management researched its
potential risks within specific industries like
INTRODUCTION real estate or the insurance sector (Morri et
al., 2024). However, there has been no clear
Sustainability has become increasingly hard
evidence that there is a significant
to ignore in today’s society. With growing
relationship between ESG and the financial
concerns over social issues like climate
performance of a firm. In one research it
change, sustainability is now more relevant
was concluded that only two of the three
than ever in investment management.
pillars seem to be having a small influence
According to a publication of the CFA
in the profitability of a firm (Xu et al.,
Institute, more than 85% of CFA Institute
2025). These articles also provide valuable
members now take E, S, or G factors of the
information about the true practical
ESG criteria into consideration in their
meaning of ESG-criteria and the way these
investments (Fender, 2021). The CFA
criteria influence investment management.
Institute is a global professional
organization that provides investment The aim of this research is to further explore
professionals with finance education, for an research gap we found in current
example their well-known CFA programs. research literature. These articles mostly
In conclusion of this publication, ESG and have a quantitative research approach to
other sustainability factors are increasingly research the relationship between the two
considered when investing. But there are variables “ESG” and “financial
also big challenges within this sector, for profitability” on a short-timeframe. After
example so called ‘greenwashing’ and the finding these articles, a research question
availability of ESG data (Fender, 2021). came to mind with a different approach.
Within this research we aim to research
In the beginning of 2021, the European
long-term financial profitability across
Commission introduced the ESG-criteria to
different types of investment firms, which
help assess the sustainability and ethical
differentiates it from existing research by
impact of businesses based on numerous
having a wider approach and longer
measurements (Deloitte, 2022). Due to
timeframe. We thereby aim to analyse the
these criteria, the value of the sustainability
measured financial profitability of ESG-
of companies is specifically documented.
criteria and not its perceived- or indirect
This clarity is incredibly valuable for
value (e.g. brand value). This has been done
investors. According to an article by
by measuring and analysing important
McKinsey, most investors are willing to pay
financial data of one hundred selected
a premium for companies that can show a
investment firms. The goal of this research
clear link between their ESG data and
is to analyse, within a three-year timeframe,
financial performance (Gelb, 2023).
how various ESG-criteria affect the long-
In the past, these criteria and their influence term financial profitability of investment
on profitability have been researched and firms. The analysis will focus on how each
analysed. So far, however, there has been ESG-criteria correlates with financial
Bastiaan Fidder (s3483010)
, indicators such as return on investment introduction of the 17 Sustainable
(ROI), corporate financial profitability Development Goals (SDG) in 2015 (IBM,
(CFP), and earnings before interest, tax, 2024). The criteria help to give businesses a
depreciation, and amortization (EBITDA) guideline to develop an ESG strategy. The
that have been found in relevant literature. results of a good ESG strategy will lead to a
It’s aim is to thereby provide a clearer high ESG score, which a business could use
understanding of the impact of ESG-criteria to promote themselves and thereby attract
on financial performance. Using the new customers or investors. This could,
selected research approach, the bivariate among other advantages, result in a cutting
relationship can be researched without the edge among competitors, according to
influence of possible third variables. This recent studies (IBM, 2024).
will be further discussed within the Theory
As stated, the ESG policy consists of three
section with a given conceptual framework
different criteria used to measure the
(see appendix 1). Lastly, we can thereby
sustainability of an organization. These
also examine how this relationship differs
three criteria consist of different assessment
by firm type and firm size due to the
metrics, like tons of CO2e and compliance
research approach as discussed earlier.
with the Paris Agreement within the criteria
The following research question is of ‘Environment’ (Manual, 2024).
formulated: “How do ESG-criteria impact According to multiple articles, these metrics
the financial profitability of investment are too vague and not standardized enough,
firms?” which leads to unreliable and/or invalid
results (An et al., 2025). One of these
In the rest of this paper, the existing
articles discusses the value of disclosing
literature about the impact of ESG-criteria
ESG information within Chinese businesses
on the financial profitability of investment
specifically. This article states that it’s
firms is discussed. A prediction of the
incredibly hard to determine if ESG really
expected results, consisting of practical and
adds any direct value because there is not
theoretical contributions, is discussed in the
one standardized version of ESG
Contributions section.
assessment (An et al., 2025). Furthermore,
the research article concludes that only two
THEORY of the three criteria of ESG are
To conclude the impact of ESG-criteria on distinguished to add significant value to a
the profitability of investment firms, firstly business (An et al., 2025). Most
the key constructs of the research should be importantly, however, it is believed that
further defined. The key constructs “ESG- ESG adds mainly indirect value to a firm
criteria” and “financial profitability” are at (An et al., 2025).
focus within this study.
ESG AS A SUSTAINABILITY MEASURE
Using the Environmental, Social, and
Governance (ESG) criteria, businesses can
deliver their contribution to a sustainable
and social future economy. These three
criteria were developed after the
financial profitability of investment firms.
SUSTAINABILITY AGAINST Most studies about ESG-criteria in relation
PROFITABILITY to investment management researched its
potential risks within specific industries like
INTRODUCTION real estate or the insurance sector (Morri et
al., 2024). However, there has been no clear
Sustainability has become increasingly hard
evidence that there is a significant
to ignore in today’s society. With growing
relationship between ESG and the financial
concerns over social issues like climate
performance of a firm. In one research it
change, sustainability is now more relevant
was concluded that only two of the three
than ever in investment management.
pillars seem to be having a small influence
According to a publication of the CFA
in the profitability of a firm (Xu et al.,
Institute, more than 85% of CFA Institute
2025). These articles also provide valuable
members now take E, S, or G factors of the
information about the true practical
ESG criteria into consideration in their
meaning of ESG-criteria and the way these
investments (Fender, 2021). The CFA
criteria influence investment management.
Institute is a global professional
organization that provides investment The aim of this research is to further explore
professionals with finance education, for an research gap we found in current
example their well-known CFA programs. research literature. These articles mostly
In conclusion of this publication, ESG and have a quantitative research approach to
other sustainability factors are increasingly research the relationship between the two
considered when investing. But there are variables “ESG” and “financial
also big challenges within this sector, for profitability” on a short-timeframe. After
example so called ‘greenwashing’ and the finding these articles, a research question
availability of ESG data (Fender, 2021). came to mind with a different approach.
Within this research we aim to research
In the beginning of 2021, the European
long-term financial profitability across
Commission introduced the ESG-criteria to
different types of investment firms, which
help assess the sustainability and ethical
differentiates it from existing research by
impact of businesses based on numerous
having a wider approach and longer
measurements (Deloitte, 2022). Due to
timeframe. We thereby aim to analyse the
these criteria, the value of the sustainability
measured financial profitability of ESG-
of companies is specifically documented.
criteria and not its perceived- or indirect
This clarity is incredibly valuable for
value (e.g. brand value). This has been done
investors. According to an article by
by measuring and analysing important
McKinsey, most investors are willing to pay
financial data of one hundred selected
a premium for companies that can show a
investment firms. The goal of this research
clear link between their ESG data and
is to analyse, within a three-year timeframe,
financial performance (Gelb, 2023).
how various ESG-criteria affect the long-
In the past, these criteria and their influence term financial profitability of investment
on profitability have been researched and firms. The analysis will focus on how each
analysed. So far, however, there has been ESG-criteria correlates with financial
Bastiaan Fidder (s3483010)
, indicators such as return on investment introduction of the 17 Sustainable
(ROI), corporate financial profitability Development Goals (SDG) in 2015 (IBM,
(CFP), and earnings before interest, tax, 2024). The criteria help to give businesses a
depreciation, and amortization (EBITDA) guideline to develop an ESG strategy. The
that have been found in relevant literature. results of a good ESG strategy will lead to a
It’s aim is to thereby provide a clearer high ESG score, which a business could use
understanding of the impact of ESG-criteria to promote themselves and thereby attract
on financial performance. Using the new customers or investors. This could,
selected research approach, the bivariate among other advantages, result in a cutting
relationship can be researched without the edge among competitors, according to
influence of possible third variables. This recent studies (IBM, 2024).
will be further discussed within the Theory
As stated, the ESG policy consists of three
section with a given conceptual framework
different criteria used to measure the
(see appendix 1). Lastly, we can thereby
sustainability of an organization. These
also examine how this relationship differs
three criteria consist of different assessment
by firm type and firm size due to the
metrics, like tons of CO2e and compliance
research approach as discussed earlier.
with the Paris Agreement within the criteria
The following research question is of ‘Environment’ (Manual, 2024).
formulated: “How do ESG-criteria impact According to multiple articles, these metrics
the financial profitability of investment are too vague and not standardized enough,
firms?” which leads to unreliable and/or invalid
results (An et al., 2025). One of these
In the rest of this paper, the existing
articles discusses the value of disclosing
literature about the impact of ESG-criteria
ESG information within Chinese businesses
on the financial profitability of investment
specifically. This article states that it’s
firms is discussed. A prediction of the
incredibly hard to determine if ESG really
expected results, consisting of practical and
adds any direct value because there is not
theoretical contributions, is discussed in the
one standardized version of ESG
Contributions section.
assessment (An et al., 2025). Furthermore,
the research article concludes that only two
THEORY of the three criteria of ESG are
To conclude the impact of ESG-criteria on distinguished to add significant value to a
the profitability of investment firms, firstly business (An et al., 2025). Most
the key constructs of the research should be importantly, however, it is believed that
further defined. The key constructs “ESG- ESG adds mainly indirect value to a firm
criteria” and “financial profitability” are at (An et al., 2025).
focus within this study.
ESG AS A SUSTAINABILITY MEASURE
Using the Environmental, Social, and
Governance (ESG) criteria, businesses can
deliver their contribution to a sustainable
and social future economy. These three
criteria were developed after the
