1. INTRODUCTION

It is observed that in recent years a lot of emphasis is laid on the ESG indicators and green finance which is in fact becoming a very critical instrument in furthering long term sustainability agenda. In recent years there is a tremendous urge from the different stakeholders, institutional investors as well as civil society organization to make a proper disclosure and enhanced transparency in environmental disclosure and a commitment towards eco-friendly investments in India. This has resulted in a number of firms to align their strategic goals with sustainable development objectives. In order to quantify and enhance their sustainable initiatives a number of advanced technologies has been adopted like emission tracking tools, digital monitoring system or energy efficient innovation.

The present paper actually tries to correlate these factors and tries to investigate into the interaction of the green financial investments, ESG performance and also technology-based sustainability solutions. The analysis has been done by extracting data from CMIE prowess database software of Indian firms for a multi time period. The study though empirical analysis basically tries to bring out how the businesses are navigating and relating green finance, technology and governance to achieve environmental sustainability.

2. LITERATURE REVIEW:

Some past works reviewed by me for the present study are as follows:

Rana et al.¹ in their book has tried to explore the relationship between ESG reporting and enhanced transparency and shareholder trust. The book also explores the dynamism of ESG accounting and auditing practices in China.

Malik et al.² in their paper have stated that the firm’s performance is increased due to higher ESG disclosures and it even lowers the cost of debt for the companies. Thus, ESG can be utilized as a strategic tool to improve investor confidence.

Pareek et al.³ tried to find out the impact of the gender diversity on the sustainable performance of the corporate in Indian firms. The study highlighted the fact that the increase of women proportion in the board of directors has a positive effect on the ESG performance.

Yadav et al.⁴ in their paper examined the impact of gender diversity on the ESG performance suggesting that the board should at least have three women directors to improve the ESG performance.

Maji et al.⁵ in their study concluded that the Indian firms using CRISIL ESG scores tends to indicate strong ESG performance in which especially the governance and social factors are responsible for higher ESG performance.

Khandelwal et al.⁶ has examined the impact of the ESG disclosure on the stock returns and concluded from their study that those firms with higher disclosure level underperforms than those with lower disclosure levels.

Sarkar.⁷in his study has explored the growth and performance of ESG themed mutual funds by using several ratios like Sharpe’s ratio, Treynor’s ratio etc. the study highlights the effectiveness of EGS oriented schemes to providing high long-term performance in mutual fund arena.

Shaikh.⁸has explored the relationship between ESG practices and financial performance for 510 firms in 17 countries and concluded that there was a significant and positive relationship between the environmental and governance factor on financial performance while the social factors reflected mixed results.

3. RESEARCH METHODOLOGY:

3.1 Data Source:

The data for the study has been extracted from CMIE prowess database for the years 2018-19 to 2022-23.

3.2 Sample Selection:

The sample consist of 50 publicly traded companies from energy sector, Cement sector and steel sector which are traded in both NSE and BSE. (the companies taken for the study has been given in Appendix section)

3.3 Variables and Statistical Tools used in the study:

ESG score is the dependent variable for the study. A consolidated ESG score is computed by measuring on a scale of 0 to 100 highlighting the firm’s environmental, social and governance performance.

How the ESG score is computed?

ESG score is developed by using one quantifiable indicator from each of environment, social and governance dimensions.

The environmental dimension is captured by firm’s expenditure on environmental projects derived from CSR initiatives.

The social dimensions are represented by CSR amount spent on social initiatives like health, education and community development.

The governance dimension is measured by the proportion of independent directors on the board of directors highlighting the level of transparency in the working of the companies.

The variables are then normalized by using the min-max method to ensure comparability and finally the ESG score is computed as the mean of three normalized values scaled to a 100-point system. In this paper an effort has been made to take only data driven measurement of ESG score which can be easily available from CMIE Prowess data base software.

The independent variables for the study are as follows:

i. Green Capital Expenditure represented by the expenditure incurred in sustainable environmental related projects (in crores).

ii. Research and Development for sustainable technology represented by the amount invested towards innovation and development of eco-friendly technology (in crores).

iii. Return on Assets has been taken as a proxy of profitability and is measured by the ratio of net income by Total Assets.

iv. Debt to Equity ratio which is taken as a proxy of financial leverage and computed by the ratio of debt to shareholder’s equity.

v. Technology adoption indicator is represented as a binary variable with 1 indicating the companies which have integrated sustainability focused technological solutions and 0 indicating otherwise.

To explore the linear association between the variables Pearson correlation has been used and multiple regression analysis is utilized to investigate the influence of the independent variables on the ESG scores. SPSS has been used for analysis purpose.

4 RESULT AND DISCUSSION:

4.1 Descriptive Statistics:

It can be seen from Table 1 that the average of ESG Score is 58.45 suggesting that the companies are moderately committed towards sustainability with the score ranging from 30 to 85. It is also reflecting a variation ESG practices.

Green capital expenditure is also showing a mean of 58.45 crore with a standard deviation of 89.45 % reflecting a variation in environmental spending across the companies. Even the research and development for sustainable technology with average of 34.22 crores with standard deviation of 15.33% is also highlighting a lot of deviation in spending in eco friendly projects across the companies.

Return on Assets with mean of 7.25% reflects a modest profitability and average debt equity ratio of 1.45 indicates a tilt towards more debt financing for these companies.

The average of Technology adoption of 0.72 indicates that the most of the companies have welcomed technologies which are sustainable focused with a minority are yet to adopt such practices.

It can be safely concluded from the descriptive statistics reveal a notable variation in ESG performance, integration of technology and the financial performance.

The result of Table 1 is given below:

Table 1: Descriptive Statistics:

Variable	Mean	Standard Deviation	Minimum	Maximum
ESG Score	58.45	12.80	30.00	85.00
Green Cap Expenditure in crores	124.67	89.45	20.00	410.00
Research and Development Sustainable Technology in crores	34.22	15.33	5.00	78.00
ROA (%)	7.25	3.15	1.10	15.60
Debt-Equity Ratio	1.45	0.65	0.30	3.20
Technology Adoption (0/1)	0.72	0.45	0	1

Source: Author Computation using SPSS

4.2 Correlation Analysis:

To test for the potential issue of multicollinearity among the independent variables, a Pearson correlation matrix was generated. Multicollinearity can adversely affect the validity of regression outcomes by inflating standard errors and yielding misleading significance levels (Gujarati & Porter, 2009).

According to Anderson et al. (2010), a correlation coefficient exceeding 0.80 between any two explanatory variables may suggest multicollinearity. However, the results presented in Table 2 reveal no such high correlation, indicating that multicollinearity is not a concern in this dataset.

It can be observed from the correlation result in table 2 that ESG score is very much strongly correlated with the Technology adoption (0.67), Green capital expenditure (0.62) and Research and Development sustainable technology (0.59) indicating that those firms which are witnessing high ESG performance also adopt sustainable oriented technology and allocate greater financial investment to the green initiative and innovation.

A strong correlation between green capital expenditure and Research and development sustainable technology (0.71) that those companies investing in Green environmental projects also invest in sustainable technology development. The variable technology adoption also shows a substantial correlation with both Research and Development sustainable technology (0.64) and green capital expenditure (0.58) reflecting a close inter relationship between capital allocation, technology led sustainable effort and innovation. Profitability in terms of Return on assets is showing a weak relationship with other variables indicating that financial performance may be influenced by factors outside ESG framework.

The negative correlation between debt equity ratio with ESG scores and ROA states that those firms whose financial leverage is very high tends to underperform in sustainability and profitability.

4.3 Regression Analysis:

The regression analysis result reflects that adjusted R² is 0.58 which indicates that 58% of the variation in ESG score is actually accounted for by the independent variables.

Technology adoption is positively and significantly influencing ESG score (t value = 4.12 and p <0.05 (0.000) indicating that the companies which are integrating sustainable driven technology tend to perform better in ESG evaluation.

Green Capital expenditure reflects a significant influence on the ESG score (t value = 3.11 and p value<0.05(0.003) which states the relevance of environmental capital expenditure increases ESG scores. It is also observed that Research and Development expenditure on sustainable technology (t value = 2.89 and p value<0.05(0.005) has a significant and positive effect on ESG scores highlighting that ecofriendly practices enhance ESG scores.

Debt Equity ratio is significant but negatively influencing ESG scores (t=-2.01 and p<0.05(.048)) indicating that higher debt component in capital structure may reduce flexibility in allocating funds towards long term sustainable initiatives.

In can be said from the results in Table 3 that green capital expenditure, research and development sustainability technology and adoption of relevant Technology are the key drivers to ESG success while excess debt in the capital structure of the company can act as a deterrent.

The result of Table 3 is given below:

Table 3: Regression Analysis:

Variable	Coefficient	t-statistics	p-value
Green Capital Expenditure	0.326	3.11	0.003
Research and Development Sustainable Technology	0.298	2.89	0.005
ROA	0.112	1.77	0.082
Debt-Equity Ratio	-0.124	-2.01	0.048
Technology Adoption	0.416	4.12	0.000

R²=0.61

Adjusted R² =0.58

Source: Author Computation using SPSS

5 IMPLICATION AND CONCLUSIONS:

The study suggests that more is the technology innovation or green investment in capital projects or technology adoption it results in enhanced ESG scores among the firms related to steel, cement and energy industry. The study also suggests that if the firms want to improve their ESG standings they need to improve their long-term sustainability initiative in comparison to their short-term financial gain. The negative association of debt equity ratio and ESG scores indicates the need and importance of having a balanced capital structure to support sustainability goals.

6 POLICY RECOMMENDATION:

The study suggests that if the firm wants to enhance ESG performance then it has to be committed towards environmental and technological advancement and make proper investment in green infrastructure as well as research and development sustainable technology. The regulatory bodies, policy makers should introduce targeted incentives like tax benefits or provide concessions on financing or can also introduce performance linked subsidies to encourage the firms to invest more in sustainable technologies and environmental innovation. Initiative should be taken to align the mandatory ESG norms with global standards to increase transparency and accountability so that the companies become more responsible and future looking and contribute to the environmental and social objectives at the national level.

7 LIMITATION AND SCOPE OF FURTHER RESEARCH:

The study concentrates on 50 sample companies from energy, steel and cement sector which actually limits the findings across other industries. The ESG score is computed by a simple set of indicators is quantitative in nature and which can be derived from Prowess database software ignoring qualitative aspect of sustainable performance which may affect the ESG score. The data being cross sectional in nature also limits the finding of the long-term trend or causal relationship. Further studies can be conducted using more diversified industries, sample size and utilizing panel data techniques to investigate into the changes of ESG performance.

8. REFERENCES:

1. Rana T, Rahman MJ, Öhman P. Environmental, Social and Governance Accounting and Auditing. Perspectives from China.2025

2. Malik N, Kashiramka S. Impact of ESG disclosure on firm performance and cost of debt: Empirical evidence from India. Journal of cleaner production. 2024 Apr 5; 448:141582.

3. Pareek R, Sahu TN, Gupta A. Gender diversity and corporate sustainability performance: empirical evidence from India. Vilakshan-XIMB Journal of Management. 2023 Feb 2; 20(1): 140-53.

4. Yadav P, Prashar A. Board gender diversity: implications for environment, social, and governance (ESG) performance of Indian firms. International Journal of Productivity and Performance Management. 2023 Nov 10; 72(9):2654-73.

5. Maji SG, Lohia P. Environmental, social and governance (ESG) performance and firm performance in India. Society and Business Review. 2023 Feb 2; 18(1):175-94.

6. Khandelwal V, Sharma P, Chotia V. ESG disclosure and firm performance: An asset-pricing approach. Risks. 2023 Jun 12; 11(6):112.

7. Sarkar S. Performance Evaluation of ESG Funds in India-A Study. The Management Accountant Journal. 2022 Mar 31; 57(3):40-7.

8. Shaikh I. Environmental, social, and governance (ESG) practice and firm performance: international evidence. Journal of Business Economics and Management (JBEM). 2022; 23(1):218-37.

Appendix:

List of 50 companies taken for the study

Company Name	Sector	Company Name	Sector
Reliance Industries Ltd.	Energy	Tata Steel Ltd.	Steel
NTPC Ltd.	Energy	JSW Steel Ltd.	Steel
Power Grid Corporation of India Ltd.	Energy	Steel Authority of India Ltd. (SAIL)	Steel
Oil and Natural Gas Corporation Ltd.	Energy	Jindal Steel & Power Ltd.	Steel
GAIL (India) Ltd.	Energy	NMDC Ltd.	Steel
Indian Oil Corporation Ltd.	Energy	APL Apollo Tubes Ltd.	Steel
Bharat Petroleum Corporation Ltd.	Energy	Ratnamani Metals & Tubes Ltd.	Steel
Hindustan Petroleum Corporation Ltd.	Energy	Sunflag Iron & Steel Company Ltd.	Steel
Adani Green Energy Ltd.	Energy	Welspun Corp Ltd.	Steel
Tata Power Company Ltd.	Energy	Kalyani Steels Ltd.	Steel
JSW Energy Ltd.	Energy	Usha Martin Ltd.	Steel
NHPC Ltd.	Energy	Jindal Stainless Ltd.	Steel
SJVN Ltd.	Energy	Electrosteel Castings Ltd.	Steel
Torrent Power Ltd.	Energy	Maithan Alloys Ltd.	Steel
Adani Transmission Ltd.	Energy	Shyam Metalics and Energy Ltd.	Steel
CESC Ltd.	Energy	Prakash Industries Ltd.	Steel
Oil India Ltd.	Energy

Company Name	Sector
Shree Cement Ltd.	Cement
Ambuja Cements Ltd.	Cement
ACC Ltd.	Cement
Dalmia Bharat Ltd.	Cement
JK Cement Ltd.	Cement
Ramco Cements Ltd.	Cement
India Cements Ltd.	Cement
Birla Corporation Ltd.	Cement
HeidelbergCement India Ltd.	Cement
Nuvoco Vistas Corporation Ltd.	Cement
Sagar Cements Ltd.	Cement
Orient Cement Ltd.	Cement
JK Lakshmi Cement Ltd.	Cement
Mangalam Cement Ltd.	Cement
KCP Ltd.	Cement
Deccan Cements Ltd.	Cement
UltraTech Cement Ltd.	Cement

Variable	ESG Score	Green Capital Expenditure	Research and Development Sustainable Technology	ROA	Technology Adoption	Debt Equity Ratio
ESG Score	1	0.62	0.59	0.33	0.67	-0.28
Green Capital Expenditure	0.62	1	0.71	0.29	0.58	-0.18
Research and Development Sustainable Technology	0.59	0.71	1	0.22	0.64	-0.16
ROA	0.33	0.29	0.22	1	0.17	-0.31
Technology Adoption	0.67	0.58	0.64	0.17	1	-0.22
Debt equity ratio	-0.28	-0.18	-0.16	-0.31	-0.22	1