Sustainable Finance Practices And Their Impact On Corporate Financial Performance
DOI:
https://doi.org/10.37385/msej.v7i4.10981Keywords:
Sustainable Finance, ESG, Corporate Financial Performance, Sustainability, Firm Performance.Abstract
This study aims to analyze the impact of sustainable finance practices on corporate financial performance using a literature review approach. Sustainable finance, reflected in the implementation of Environmental, Social, and Governance (ESG) principles, has become a critical issue in modern business as awareness of sustainability and corporate social responsibility continues to grow. The research method employed is a systematic literature review of relevant academic sources, including peer-reviewed journals, scholarly books, and institutional reports published between 2010 and 2025. The findings indicate that sustainable finance practices generally have a positive impact on corporate financial performance, particularly in the long term. Improvements in operational efficiency, corporate reputation, risk management, and access to financial resources are key drivers of this positive relationship. However, the results also reveal that the relationship is not always consistent, as it is influenced by contextual factors such as industry type, firm size, and regulatory environment. In addition, in the short term, sustainable finance practices may have a negative impact due to the high costs associated with their implementation. This study concludes that sustainable finance is a strategic approach that can enhance long-term corporate value, although it requires an integrated and long-term orientation. The findings are expected to provide insights for corporations, investors, and policymakers in developing sustainable business strategies.
References
Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17(1), 99–120.
Braun, V., & Clarke, V. (2006). Using thematic analysis in psychology. Qualitative Research in Psychology, 3(2), 77–101.
Clark, G. L., Feiner, A., & Viehs, M. (2015). From the stockholder to the stakeholder: How sustainability can drive financial outperformance. University of Oxford Report.
Eccles, R. G., Ioannou, I., & Serafeim, G. (2014). The impact of corporate sustainability on organizational processes and performance. Management Science, 60(11), 2835–2857.
Freeman, R. E. (1984). Strategic management: A stakeholder approach. Pitman.
Friedman, M. (1970). The social responsibility of business is to increase its profits. The New York Times Magazine.
Friede, G., Busch, T., & Bassen, A. (2015). ESG and financial performance: Aggregated evidence from more than 2000 empirical studies. Journal of Sustainable Finance & Investment, 5(4), 210–233.
Margolis, J. D., Elfenbein, H. A., & Walsh, J. P. (2009). Does it pay to be good? A meta-analysis and redirection of research on the relationship between corporate social and financial performance. Harvard Business School Working Paper.
Moher, D., Liberati, A., Tetzlaff, J., & Altman, D. G. (2009). Preferred reporting items for systematic reviews and meta-analyses: The PRISMA statement. PLoS Medicine, 6(7), e1000097.
Petticrew, M., & Roberts, H. (2006). Systematic reviews in the social sciences: A practical guide. Blackwell Publishing.
Snyder, H. (2019). Literature review as a research methodology: An overview and guidelines. Journal of Business Research, 104, 333–339.
Suchman, M. C. (1995). Managing legitimacy: Strategic and institutional approaches. Academy of Management Review, 20(3), 571–610.
Task Force on Climate-related Financial Disclosures (TCFD). (2017). Final report: Recommendations of the Task Force on Climate-related Financial Disclosures.
Tranfield, D., Denyer, D., & Smart, P. (2003). Towards a methodology for developing evidence-informed management knowledge by means of systematic review. British Journal of Management, 14(3), 207–222.
Yin, R. K. (2018). Case study research and applications: Design and methods (6th ed.). Sage Publications.
Template
