The objective of the present study was to find the impact of environment, social, and governance (ESG) performance on market measures of risk of Indian consumer goods companies. Mann – Whitney U test was used to compare the risk of companies with high ESG scores and low ESG scores. Ordinary least squares regression was used to find the impact of ESG on systematic, unsystematic, and total risk. Mann – Whitney U test showed that the firms with high ESG scores had lower total and unsystematic risk. The difference in systematic risk of high ESG and low ESG firms was insignificant. The regression results showed that systematic, unsystematic, and total risk was negatively related to the composite ESG score. Individual environment and the social and governance scores showed a negative association with total and unsystematic risk, but only social performance showed a negative association with systematic risk. In a nutshell, superior ESG performance reduced the risk of Indian consumer goods companies and helped increase shareholders’ wealth. Thus, ESG should be considered important by the companies, and they should proactively undertake activities that are responsible to all stakeholders.

1. Ahamed, N. (2014). Multiple directorship & interlock: an empirical study of its impact on firms' financial performance. Indian Journal of Finance, 8(10), 48 – 61.https://doi.org/10.17010/ijf/2014/v8i10/71848
2. Arora, A., & Bodhanwala, S. (2018). Relationship between corporate governance index and firm performance: Indian evidence. Global Business Review, 19(3), 675–689. https://doi.org/10.1177/0972150917713812
3. Balasubramanian, N., Black, B. S., & Khanna, V. (2010). The relation between firm-level corporate governance and market value: A case study of India. Emerging Markets Review, 11(4), 319–340. https://doi.org/10.1016/j.ememar.2010.05.001
4. Bird, R., Hall, A. D., Momentè, F., & Reggiani, F. (2007). What corporate social responsibility activities are valued by the market? Journal of Business Ethics, 76, 189–206.https://doi.org/10.1007/s10551-006-9268-1
5. Botosan, C. A. (2006). Disclosure and the cost of capital: What do we know? Accounting and Business Research, 36(Sup1), 31 – 40. https://doi.org/10.1080/00014788.2006.9730042
6. Brammer, S., Brooks, C., & Pavelin, S. (2006). Corporate social performance and stock returns: UK evidence from disaggregate measures. Financial Management, 35(3), 97–116. https://doi.org/10.1111/j.1755-053X.2006.tb00149.x
7. Breen, W. J., & Lerner, E. M. (1973). Corporate financial strategies and market measures of risk and return. The Journal of Finance, 28(2), 339 – 351. https://doi.org/10.2307/2978306
8. Charumathi, B., & Ramesh, L. (2017). Do social and environmental disclosures increase firm value? Evidence from Indian companies. Indian Journal of Finance, 11(4), 23–38. https://doi.org/10.17010/ijf/2017/v11i4/112628
9. Cheung, Y.-L., Stouraitis, A., & Tan, W. (2010). Does the quality of corporate governance affect firm valuation and risk? Evidence from a corporate governance scorecard in Hong Kong. International Review of Finance, 10(4), 403–432. https://doi.org/10.1111/j.1468-2443.2010.01106.x
10. Chollet, P., & Sandwidi, B. W. (2018). CSR engagement and financial risk: A virtuous circle? International evidence. Global Finance Journal, 38, 65–81. https://doi.org/10.1016/j.gfj.2018.03.004
11. Chon, M. L., & Kim, C.S. (2011). The effect of sustaining corporate social responsibility on relationship between CSR and financial performance. Korea Account. Inf. Res. Korea Account. Inf. Assoc., 29, 351–374.
12. Deloitte. (n.d.). Governance 101 - All you need to know on corporate governance practices in India. https://www2.deloitte.com/in/en/pages/risk/articles/governance-101.html
13. Dokania, A. K., & Pathak, G. S. (2015). Adopting the CSR route for corporate image building: A case study on the Indian steel industry. Prabandhan: Indian Journal of Management, 7(7), 19–30.https://doi.org/10.17010/pijom/2014/v7i7/59338
14. Friedman, M. (1970, September 13). A Friedman doctrine – The social responsibility of business is to increase its profits.The New York Times. https://www.nytimes.com/1970/09/13/archives/a-friedman-doctrine-the-social-responsibility-of-business-is-to.html
15. Goel, P. (2017). Antecedents of non-financial parameters of corporate performance on financial performance. Available at SSRN. http://dx.doi.org/10.2139/ssrn.2993002
16. Goel, P. (2018). Implications of corporate governance on financial performance: An analytical review of governance and social reporting reforms in India. Asian Journal of Sustainability and Social Responsibility, 3, Article 4. https://doi.org/10.1186/s41180-018-0020-4
17. Grier, S. A., & Kumanyika, S.K. (2008). The context for choice: Health implications of targeted food and beverage marketing to African Americans. American Journal of Public Health, 98(9), 1616 – 1629.https://doi.org/10.2105/AJPH.2007.115626
18. Hemingway, C. A., & Maclagan, P. W. (2004). Managers' personal values as drivers of corporate social responsibility. Journal of Business Ethics, 50, 33–44. https://doi.org/10.1023/B:BUSI.0000020964.80208.c9
19. Kang, J. H., & Kim, D. H. (2010). The study on the relations between corporate social responsibility and financial performance. Journal of Korea Academia - Industrial Cooperation Society, 11(2), 681–688.
20. Kaur, M., & Vij, M. (2018). Corporate governance index and firm performance: Empirical evidence from Indian banking. Afro-Asian Journal of Finance and Accounting, 8(2), 190–207. https://doi.org/10.1504/AAJFA.2018.091065
21. Kim, M., & Kim, Y. (2014). Corporate social responsibility and shareholder value of restaurant firms. International Journal of Hospitality Management, 40, 120–129. https://doi.org/10.1016/j.ijhm.2014.03.006
22. Kuo, T.-C., Chen, H.-M., & Meng, H.-M. (2021). Do corporate social responsibility practices improve financial performance? A case study of airline companies. Journal of Cleaner Production, 310, Article127380. https://doi.org/10.1016/j.jclepro.2021.127380
23. Levy, H., & Sarnat, M. (1984). Portfolio and investment selection: Theory and practice. Prentice Hall.
24. Li, Y., & Yang, H. I.-H (2012). Disclosure and cost of equity capital: An analysis at the market level. Research Collection School of Accountancy. https://ink.library.smu.edu.sg/soa_research/1162
25. Liu, D.-Y., & Lin, C.-H. (2015). Does financial crisis matter? Systematic risk in the Casino industry. The Journal of Global Business Management, 11(1), 147–155.
26. Luo, X., & Bhattacharya, C. B. (2006). Corporate social responsibility, customer satisfaction, and market value. Journal of Marketing, 70(4), 1–18. https://doi.org/10.1509/jmkg.70.4.001
27. Luo, X., & Bhattacharya, C. B. (2009). The debate over doing good: Corporate social performance, strategic marketing levers, and firm-idiosyncratic risk. Journal of Marketing, 73(6), 198–213. https://doi.org/10.1509/jmkg.73.6.198
28. Manimalar, R., & Sudha, S. (2016). Corporate ethical and legal responsibility: Effects of CSR on consumer trust and brand loyalty. Prabandhan: Indian Journal of Management, 9(6), 7–19. https://doi.org/10.17010/pijom/2016/v9i6/94957
29. Mann, H. B., & Whitney, D. R. (1947). On a test of whether one of two random variables is stochastically larger than the other. The Annals of Mathematical Statistics, 18(1), 50 – 60. http://www.jstor.org/stable/2236101
30. Maqbool, S., & Zameer, M. N. (2018). Corporate social responsibility and financial performance: An empirical analysis of Indian banks. Future Business Journal, 4(1), 84–93. https://doi.org/10.1016/j.fbj.2017.12.002
31. McWilliams, A., & Siegel, D. (2000). Corporate social responsibility and financial performance: Correlation or misspecification? Strategic Management Journal, 21(5), 603–609.https://doi.org/10.1002/(SICI)1097-0266(200005)21:5<603::AID-SMJ101>3.0.CO;2-3
32. Monda, B., & Giorgino, M. (2013). Corporate governance and shareholder value in listed firms: An empirical analysis in five countries (France, Italy, Japan, UK, USA). Corporate Ownership & Control, 10(3), 36 – 50. https://doi.org/10.22495/cocv10i3siart3
33. Nelling, E., & Webb, E. (2009). Corporate social responsibility and financial performance: The “virtuous circle” revisited. Review of Quantitative Finance and Accounting, 32, 197–209. https://doi.org/10.1007/s11156-008-0090-y
34. O'brien, R. M. (2007). A caution regarding rules of thumb for variance inflation factors. Quality & Quantity, 41, 673 – 690. https://doi.org/10.1007/s11135-006-9018-6
35. Park, S., Song, S., & Lee, S. (2017). Corporate social responsibility and systematic risk of restaurant firms: The moderating role of geographical diversification. Tourism Management, 59, 610–620. https://doi.org/10.1016/j.tourman.2016.09.016
36. Pollach, I. (2015). Strategic corporate social responsibility: The struggle for legitimacy and reputation. International Journal of Business Governance and Ethics, 10(1), 57– 75.https://doi.org/10.1504/IJBGE.2015.068685
37. Reynolds, F. (2020, September 3). COVID-19 accelerates ESG trends, global investors confirm. Principles for responsible investment. https://www.unpri.org/pri-blog/covid-19-accelerates-esg-trends-global-investors-confirm/6372.article
38. Shakil, M. H. (2021). Environmental, social and governance performance and financial risk: Moderating role of ESG controversies and board gender diversity. Resources Policy, 72, Article 102144. https://doi.org/10.1016/j.resourpol.2021.102144
39. Sharma, D., Bhattacharya, S., & Thukral, S. (2019). Resource-based view on corporate sustainable financial reporting and firm performance: Evidences from emerging Indian economy. International Journal of Business Governance and Ethics, 13(4), 323–344. https://doi.org/10.1504/IJBGE.2019.099565
40. Sharpe, W. F. (1963). A simplified model for portfolio analysis. Management Science, 9(2), 277–293. http://www.jstor.org/stable/2627407
41. Shen, C.-H., & Chang, Y. (2009). Ambition versus conscience, does corporate social responsibility pay off? The application of matching methods. Journal of Business Ethics, 88, 133–153. http://dx.doi.org/ 10.1007/s10551-008-9826-9
42. Shukla, A., & Geetika. (2017). The relationship between corporate social responsibility and financial performance of Indian banks. Available at SSRN. https://ssrn.com/abstract=3193871
43. Singh, A., & Verma, P. (2017). Investigating the nexus of corporate social responsibility and brand equity: A systematic review. Prabandhan: Indian Journal of Management, 10(2), 7–25. http://doi.org/10.17010/pijom/2017/v10i2/110625
44. Sultana, N. (2021, April 23). ESG funds gain pace on focus shift to sustainability. Mint. https://www.livemint.com/money/personal-finance/investors-rush-to-esg-funds-as-covid-drives-focus-on-sustainability-11619098429192.html
45. Thacker, H. (2019). Understanding the four levels of CSR. The CSR Journal. https://thecsrjournal.in/understanding-the-four-levels-of-csr/
46. Venkatraman, K., & Selvam, M. (2014). Impact of corporate governance practices and firm performance: An empirical study. Indian Journal of Finance, 8(12), 34–45. http://doi.org/10.17010/ijf/2014/v8i12/71691
47. Viet Ha, H. T., Thuy Van, V. T., & Hung, D. N. (2019). Impact of social reponsibility information disclosure on the financial performance of enterprises in Vietnam. Indian Journal of Finance, 13(1), 20–36. https://doi.org/10.17010/ijf/2019/v13i1/141017