G.2055Page1GlobalResearchjournalofNaturalScience&Technology(GRJNST)Volume:04-Issue2(2026),2055ISSNP:2790-7643ISSNE:2790-7651www.grjnst.nethttps://doi.org/10.53762/grjnst.04.02.07RelationshipBetweenEsgRatingsandFinancialPerformanceofHeavilyPollutingIndustriesReceived:29December2025.Accepted:29January2025.Published:31March2026SayedBesmillahSultaniPublicManagementandUrbanCultureAnhuiUniversityofScienceandTechnologyCorrespondingAuthor:Sayedbesmillah786@gmail.comGouYanfeng(苟延峰)PublicManagementandUrbanCultureAnhuiUniversityofScienceandTechnologygouyanfeng83@163.comMohammedAqilSultaniDepartmentofEconomics,KabulUniversityaqilsoltani773@gmail.comGRJNST,Volume:04-Issue2(2026)/ISSNP:2790-7643ArticleID:2055https://doi.org/10.53762/grjnst.04.02.07Copyright©2026GRJNST.ThisarticleispublishedunderanOpenAccessmodel.ItismadeavailabletothepublicunderthetermsoftheCreativeCommonsAttribution4.0International(CCBY4.0)license,whichpermitsunrestricteduseanddistributionG.2055Page2Abstract:ThepaperdiscussestherelationbetweenEnvironmental,SocialandGovernance(ESG)performanceandfinancialperformanceoftheboththeindustrieswhicharehighlypollutinginregardstoprofitability,marketvalue,costburdenandriskreduction.Itisanalyzedinaquantitativeformwhichisbasedonsecondarydataandthefirmsaredividedintohigh,mediumandlowESGperformers.Theresultsindicatethatthepercentageofhigh,mediumandlowESGcompaniesis38,42and20respectivelythatimpliesthattheindustriesareinatransitionalstageofenvironmentalscanningwithESG.TheresultsindicatethatthereisapositivecorrelationbetweentheESGperformanceandprofitabilitywiththehighESGfirmsthatreportedanaverageof18proportionofprofitmargincomparedto14and10proportionofprofitmarginofmediumandlowESGfirmsrespectively.Similarly,highESFcompanies(22)relativetomedium(16)andlow(11)havegreatergrowthinmarketvaluesbecauseofthepreferenceofsustainablecompaniesbyinvestors.However,therealizationofESGisassociatedwiththehigh-costburdenbecauseESGrelatedcostsincreaseby26percentthatisgreaterthantherevenueincreaseintheshorttermof19%.Thepaperalsomentionsthat,ESGplaysaroleinriskmanagement,withhighESGfirmshavingasmallerrisk(30percent)whencomparedtomediumandlowESGfirms(22and14percent,respectively).Inaddition,theESGrankswithalong-termfinancialimpact(24)thatistwotimesasmuchasitsshort-termimpact(12),andthiswillservetodemonstrateitsstrategicimportance.Overall,thefindingssuggestthat,despitethefactthatESGinvestmentsmaycreateshort-termprofitability,ithasmuchtooffertothelong-termfinancialperformance,growth,andminimizationofrisksinhighlypollutingsectors.Keywords:ESGrating,financialperformance,information1.IntroductionThisconceptofEnvironmental,SocialandGovernance(ESG)hasgainedprominenceoverthelastfewyearsastheachievementsofcompaniesareevaluatedparticularlyinthedirectionthatisconsideredastheenvironmentallysensitiveone.Theseincludetheenergy,mining,chemicals,andmanufacturingindustries,amongthemostpollutingindustriesthatareunderstrainbytheregulators,investors,andthesocietytogogreenandreducetheirimpactontheenvironment(Song,2023).ESGratingshavealreadybecomeanormalizedtooltoassessthecapabilityofcompaniestoaddresstherisksandGRJNST,Volume:04-Issue2(2026)/ISSNP:2790-7643ArticleID:2055https://doi.org/10.53762/grjnst.04.02.07G.2055Page3opportunitieslinkedtosustainabilityandhavebecomeamandatoryfactorinthemoderninvestmentandcorporatedecision-making(Naeem,Cankaya&Bildik,2022).TheESGperformance-financialperformancecorrelationhasbecomeoneofthemostimportantissuesofinterestamongscholarsandpractitioners.Theclassicalbusinessesinthepollutingindustrieswereorientedtowardsprofitability,andnotonsocialandenvironmentalconcerns.However,thisattitudehaschangedduetoheightenedawarenessontheproblemofclimatechange,environmentaldegradationandcorporateresponsibility.CompaniesarenowconsideredtostrikeabalancebetweenfinancialperformanceandsustainabilitythatleadstotheconsiderationofESGrequirementsinthestrategicplanningandoperation.Thismovementleadstoanactualquestioni.e.whethertheinESGenhancesorconstrainsfinancialperformancesi.e.inasectorwherecompliancecostsarerelativelyhigh(Zhang&Jung,2023)improvedperformanceTherearenumerouseffectsthattheESGinvolvementcanhaveonthefinancialperformance,theoretically(Makridou,Doumpos&Lemonakis,2024);.Ontheonehand,goodESGactivitiesmayraisethecostofoperationsduetoinvestingintocleanertechnologies,complyingwithregulations,andsocialactivities.Ontheotherhand,thesepracticescanenhancethefirmimages,attractresponsibleinvestors,reducerisksandincreaseprofitabilityinthelong-term.Environmentriskmaybeparticularlyinfluentialindeterminingtheworthofthecompanyandsustainabilityintherealmofhighlypollutedsectors(Yinetal.,2023).ThefactuallinkagebetweenESGratingandfinancialperformanceisinconclusivealthoughthereexistmorestudies.Otherstudiesshowtherelationshiptobepositiveimplyingthatthebetterthescoringfirms,thebetterthefinancialresultsofthefirmisduetotheefficiencyandtrustamongstakeholders.TheotherindividualsfeelthatotherexpensesareincurredintheimplementationofESGwhichcanhaveadverseimpactsontheshort-termprofitability.Thisparadoxpresentsasignificanceofmorestudies,particularlyinthehigh-impactsectorswheresustainability-financialoutcomestrade-offsaremoreevident(Nguyenetal.,2021).ThestudywillaimatresearchingtherelationshipbetweenESGratingandfinancialperformanceofhighlypollutingindustries.TheevaluationofkeyfinancialindicatorsandtheevaluationofESGindicatorswillhelpthestudyfindoutwhethersustainabilityindicatorsleadtofinancialprosperityortheyundermineachievements.(Dasilas&Karanović,2025).GRJNST,Volume:04-Issue2(2026)/ISSNP:2790-7643ArticleID:2055https://doi.org/10.53762/grjnst.04.02.07G.20551.1ProblemStatementPage4ThecompaniesinthemostpollutingsectorsarebeingforcedtospendasignificantsumoftheiroperationbudgetsonESGcompliancewhichsometimesisevenmorethanathirdofallexpenditureonsustainability.Thisbringsafeltcontradictionbetweenenvironmentalaccountabilityandmonetaryoutcomewhoseimmediategainmaydiminishconsideringlong-termincomeisnotguaranteed.Accordingtoempiricalresearchstudies,althoughalargeproportionoffirmssaythattheyareexpandingtheirESGratings,onlyslightlymorethanhalfofthemindicatetheriseinfinancialperformance,meansthatthereisnobalancebetweensustainabilityeffortandfinancialoutcomes(Chenetal.,2022).Alongwiththisthereisthegrowingcostontheenvironmentalpolicies,carbonreductionplansandsocialresponsibilityprogramsthatisrapidlygrowingatafasterratethantheriseinrevenuesofmostofthehigh-impactbusinesses(Li,Hu&Hong,2024).Thisputsthebusinessentitiesintoascenarioofachievingincreasedcostofoperationwithoutfinancialbenefits.Inthemeantime,theexpectationsoftheinvestorsarealsoevolvingasagrowingpercentageofinstitutionalinvestorsarebecominginterestedincompaniesthatdonotdisregardESGs,yetthedirectfinancialimpactofthetrendisnotalwaysvisibleintheperformanceofcompanies(Abdi,Li&Càmara-Turull,2022).Thisputsthemanagersatacross-roadastowhichlevelofESGinvestmentisthebest.TheothermajorissueisthevariationbetweentheESGperformanceofthefirmsinthesameindustry.AsmuchasitispossibletofindanumberoffirmswhohavebeenabletoachievehighESGratingandhaveenhancedtheirmarketvalue,thesamenumberoffirmscannottranslatesustainabilityactivitiesintofinancialsuccess.ThisskeweddistributionsuggeststhatESG-financialperformancerelationshipisneitherahomogenousrelationshipnormaybesubjecttoinfluenceunderdifferentsituationalfactorsthatwereconsideredsuchasfirmsize,governanceandmarketenvironmentstructure(Xu&Zhu,2024).1.2ResearchGapDespitethefactthatthemassofknowledgeonthetopicoftheESGandfinancialperformancehasbeenestablished,theknowledgeofhowsucharelationshipfunctionswithintheindustrywithahighdegreeofpollutantemissionsleavesmuchtobedesired.Thelargepartoftheexistingliteratureisnotproperlyrepresentedbyhighpollutingsectors,asitisbuiltonthegeneralormixed-industrysamples,withtheenvironmentaleffectbeingrelativelymoderate.Asaresult,thespecificityofthecostsystemandGRJNST,Volume:04-Issue2(2026)/ISSNP:2790-7643ArticleID:2055https://doi.org/10.53762/grjnst.04.02.07G.2055Page5regulationrequirementsoftheseindustriescannotbereflectedinthecurrentresearch(Xu&Zhu,2024).Inaddition,themajorityofthestudiesarefocusedonthedevelopedeconomieswhoseregulatoryframeworksandsustainabilitypracticesarehighlydeveloped.Quiteonthecontrary,thenewmarketspossesstheirdynamics,andthedegreeofESGawareness,compliancewithregulations,andfinancialrestrictionsarevarying.Thisproducesanincongruityoftheresultsastherelationshipinonecasemaynotdirectlybeappliedtoanother(Domanović,2022).TheothergapareaisconnectedwiththemethodologyofmeasurementbecausethemajorityofstudiesaregroundedintheindividualdimensionsofESGbutnotintheoverallanalysis.Theenvironmentalfactorsreceivemuchattentionoftheresearch,andthesocialandgovernanceaspectsreceiveacomparativesecondaryattention.ThepossibilitiesofobservingthesynergisticimpactofESGonfinancialperformancearelimitedbythisfragmentedapproach(Matakanye,VanDerPoll&Muchara,2021).Furthermore,theexistingstudiestendtobemorefocusedonshort-termfinancialindicatorsandlittleimportanceisgiventotheperformanceoflong-termperformance.Eventhoughthefactthatthelower-returnofESGinvestmentsmaybeattainedintheshortrunispartiallysupported,itslong-termbenefitsinriskreductionandvaluecreationhavenotbeeneffectivelystudied.ThisisduetothefactthatthislacksalongitudinalstudyoftheinfluenceofESGonfinancialperformanceasitprogresses,particularlyinindustrieswithhighlevelsofenvironmentalimpacts(Gulletal.,2022).1.3.ResearchQuestions1.2.3.1.TowhatextentdoimprovedESGratinghaveimpactsonthefinancialperformanceofacompanyinhighlypollutedindustriesintermsofprofitabilityandmarketvalue?Whatisthecost-financialreturnsassociationbetweenESG-relatedcostsandthefinancialreturnsoverthefirmsintheenvironmentallysensitiveindustries?TowhatextentdoESGactivitiesleadtolongtermfinancialstabilityversusshorttermfinancialperformanceofhighpollutionindustries?1.4.ResearchObjectivesToexaminetherelationshipbetweentheESGratingsandthefinancialperformancemeasuresofthepollutedindustries.GRJNST,Volume:04-Issue2(2026)/ISSNP:2790-7643ArticleID:2055https://doi.org/10.53762/grjnst.04.02.07G.20552.3.Todeterminetheimplicationsofinvestmentsrelatedtothesensitivityoftheenvironmenttoprofitabilityandoperationalefficiencyinenvironmentalsensitiveindustries.Tostudythefinancialeffect(shortandlong-term)oftheESGpracticesonthecompaniesinthehigh-pollutionindustries.Page62LiteratureReviewSandberg,Alnoor&Tiberius,2023talkabouttherelationbetweenenvironmentalperformanceandfinancialperformanceandexplainthathigherenvironmentaldisclosuresareassociatedwiththehighmarketvaluationofthecompanyandthetrustoftheinvestor.Accordingtotheirstudy,environmentalreportingtransparencymayhelptoreduceinformationasymmetrythatislikelytohaveapositiveeffectontheperformanceofthefirm.Thisisparticularlyimportantwithintheenvironmentofthehighlypollutingindustrieswhereaccountabilityonthesideofthestakeholdersismuchneeded.Thosecompaniesthatdiscloseenvironmentaloperationshaveabetterchanceofbuildingarelationshipoftrustbetweenthemselvesandtheinvestorandtheregulatorswhichcanbetranslatedintomonetarybenefits.However,thestudyalsostatesthattheimpactisnotuniversalacrossallthecompaniesthatimpliesthatefficiencyoftheESGpracticesdependsonthewaytheyareconductedandreported.Thearticle(Naimy,ElKhoury&Iskandar,2021)isdevotedtoqualityofESGdisclosuresandtheirfinancialperformanceimplication.ThestudybelievesthatalltheESGreportingmaynothaveyieldingpositivefinancialoutcomes;thetrustworthinessandthestabilityofthedisclosuresprovestobeconsiderable.ThereportingofESGqualityisbetterplacedinenhancingbetterdecision-makingamonginvestors,andalsoinreducinguncertaintythatcanresultinpoorfinancialperformance.TheplausibilityofESGdisclosuresisfurtherimperativeinanindustrywithhighpollutionrates,wheretheenvironmentalrisksareanissueofhighconcern.ThepapernotesthatfirmsthatengageinsymbolicorshallowESGreportingmaynotachieveasmuchfinancialbenefitsasfirmsthatengageinsustainability.Thearticleby(Zheng,Khurram&Chen,2022)providesanuntimelytheoreticalbackgroundofcorporateenvironmentalresponsibilityanditsrelationshipwiththebusinessperformance.Thispapersuggeststhatenvironmentalissuesshouldbefactoredinthecorporatestrategyinordertobelong-termsustainable.Thisincorporationcanbeimposedinthemanufacturingproceduresandconsumptionofresourcesthatcanfrequentlyberadicaltotheleanofexceedinglycontaminatingsectors.ThismaybeGRJNST,Volume:04-Issue2(2026)/ISSNP:2790-7643ArticleID:2055https://doi.org/10.53762/grjnst.04.02.07G.2055Page7expensiveinshorttermoutlook,butinthelongtermonemayhaveapositiveadvantageofefficiencyandreducedenvironmentalhazards.Shrivastavasaysinhisworkthatwiththehelpofenvironmentalperformance,itisnecessarytoviewitasacompetitivestrategicadvantageandnotaregulatorycost.Wemaythinkof(Tabur&Bildik,2025)whospeakaboutthebroaderconceptofcorporatesocialresponsibility(CSR),thatiscloselyassociatedwithESG.Accordingtotheirresearch,CSRactivitiesmayenhanceperformanceofthefirm,bybuildingarelationshipwiththestakeholders,employeeengagementandbrandimage.GoodCSRpracticescanbeusedtocounterhighenvironmentalimpactofindustriestoprovidecorporationswithlegitimacy.TheauthorsalsonotethatfinancialperformancehasarelationshipwithCSR,whichisdeterminedbythecontextlikenatureoftheindustryandexpectationsofthestakeholders.ThiswouldsuggestthattheESGactivitieswithinthehighpollutantindustriesmayhavedifferentfinancialoutcomesascomparedtothelessimportant.Thestudyofresearch(Chininga,Alhassan&Zeka,2024)focusesontheroleoftheESGperformanceontheaccessibilitytotheaccesstothefinance.TheirfindingsindicatethatcapitallimitsareminimizedinthemajorityofthecasesincompaniesthathavehigherESGratingasbeingperceivedlessriskyandmoresustainablebyinvestors.Thisisparticularlyintheverypollutingindustrieswherethecostofcapitalmightincreasebecauseoftheenvironmentalrisks.ByimprovingESGpractice,companieswillbeinapositiontoattractwiderinvestors,andalsofinanceinbetterterms.Accordingtotheresearch,thepracticesofESGhaveanimpactontheinternaloperationsofthecompany,aswellasontheexternalrelationshipsoffinances.Accordingtotheauthors(He,Jing&Chen,2023),sustainabilityaccountingandreportingplayakeyroleinthecontextofconnectingESGperformancetofinancialperformance.Basedontheirwork,contemplationusingsustainabilitymetricscanbeencompassedintothenormalaccountingsystemsinsuchamannerthattheyareabletoprovideamorecomprehensivepictureofthefirmperformance.ESGfactorcanbereportedatafinancialreporting,wherebyindustrieswithhighamountsofpollutioncanbeincorporatedandthecostscanbehighsuchthatmanagersmakegooddecisions.Theotherfactorthathasbeenhighlightedinthestudyisthattheenhancedsustainabilityreportingcanresultinraisingtransparencyandaccountabilitywhicharekeyfactorstoinvestorconfidence.Theauthors(Zhou,Liu&Luo,2022)focusontheroleofcorporategovernanceinthedefinitionoftheperformanceofESG.Basedontheirstudy,propergovernancestructuresarerequiredintheassuranceofproperimplementationofsustainabilityGRJNST,Volume:04-Issue2(2026)/ISSNP:2790-7643ArticleID:2055https://doi.org/10.53762/grjnst.04.02.07G.2055Page8practices.Intheextremelypollutingindustries,thegovernanceproceduresarequiteapplicableintheendeavortoreconciletheenvironmentalobligationswiththeeconomicinterests.ThestudyisbiasedtowardsthefactthataproperlydevelopedgovernancesystemisabletoassistfirmstomanageESGrisksandachievegoodfinancialperformance.ThisdemonstratestheimportanceofgovernancebeingoneoftheaspectsofESGperformancethatshouldbegivenattention.Empirically,(Alfalih,2023)showthatcorporatesocialresponsibilityisrelatedtofinancialperformanceandthuscametoaconclusionthat,sociallyresponsiblefirmsareableandtendtoperformequallyorevenbetterthanothercompaniesofthesamecaliberbutnotsociallyresponsible.Theirfindingsareachallengetothetraditionalunderstandingofsustainabilityprojectsthatshouldresultinareductioninprofitability.ThisperceptionparticularlyappliestobusinessesinthesectorwithahighdegreeofpollutionwherebycompaniesmayperceiveESGinvestmentsascostly.ThestudyshowsthatESGpracticesmayleadtocreationofvaluesratherthandestructionofvaluesintherightway.Theanalysisofcorporatesocialperformanceisbuiltontheapproachofstakeholder(Baranetal.,2022).Theirpublicationpointsoutthatfirmsshouldfulfilltheexpectationoftheirdifferentstakeholdersthatcompriseinvestors,regulators,customersandcommunities.InthecontextofESG,itwouldmeanthatfirmsintheverypollutingindustriesshouldmakesurethattheycontroltheenvironmentandsocialresponsibilitiesandfinancialperformance.Thestudyobservesthatfailuretomeettherequirementsofthestakeholderscanleadtothereputationallossesandfinanciallossesbuttheefficiencyinmanagingthestakeholderscanleadtotheincreaseinthefirmvalue.3.ResearchMethodology3.1ResearchPhilosophyThephilosophyofresearchadoptedinthisstudyispositivismsinceitemphasizesonobjectivity,measurementandempiricalvalidation.Thephilosophyappliedisthecorrectonesincethevariablesbeinganalyzed,whicharequantifiable,areESGratingsandthefinancialperformanceindicators.Thestudywillrelyonobservableandmeasurabledatainanefforttoestablishgeneralizationalassociationandminimizetheissueofsubjectivity.3.2ResearchApproachGRJNST,Volume:04-Issue2(2026)/ISSNP:2790-7643ArticleID:2055https://doi.org/10.53762/grjnst.04.02.07G.2055Thedeductiveresearchmethodistakenintoaccount,andthecurrenttheoriesofESGandfinancialperformanceareusedasareference.Inthesetheories,anassumptionismadeontherelationshipbetweenESGratingandfinancialperformance.Theyarethentestedusingtheempiricaldataanalysisandtherebyrenderingthestudysystematicandtheorybased.Page93.3ResearchStrategyThepaperfollowsaquantitativeresearchmethod,whichispremisedonthenumericaldataandstatisticalanalysis.TheESGratingsarecontrastedwithsuchfinancialperformanceindicatorsasprofitabilityandfirmvalue.Therelationshipscanbemeasuredcorrectlyanditispossibletomakecredibleconclusionswiththestrategy.3.4ResearchDesignThisisadescriptiveandexplanatoryresearchdesign.ThedescriptiveperspectivewillprovidethebroadideaoftheESGpracticesandfinancialperformanceinthehighlypollutingsectorsbuttheexplanatoryperspectivewillbeconcernedwiththecorrelationofthem.Thecombinationallowsthisstudytopresentandinterpretdata.3.5DataCollectionMethodsThesecondarydatasourcesusedintheresearchincludetheESGratingdatabases,financialreportsofthecompanies,andpubliclyavailabledatasets.Thedatacutsacrossdifferentfirmsthatareinoperationwithinsuchindustryasenergy,miningandmanufacturingthusisapplicabletotheaimsoftheresearch.Secondarydatamakestheanalysismorecredibleandprovidesachancetocarryouttheanalysisonalargerscale.3.6SamplingTechniquePurposivesamplingtechniqueisemployedtorecognizethefirmseligibletobethepollutingindustriesinlargenumbers.ThiswillrenderthissampleadirectreflectionofwhatthestudyisconcernedwithandcanbeabletoanalyzethefindingsofESGandfinancialperformanceinhighimpactsectors.3.7DataAnalysisTechniquesThestatisticalmethodsusedtoperformtheanalysisofthestatisticsarethedescriptivestatistics,thecorrelationanalysisandtheregressionanalysis.TheESGandfinancialanalysisissummarisedusingthedescriptivestatistics,thestrengthofthecorrelationsbetweenthevariablesareestablishedusingthecorrelationanalysis,andtheefficiencyofGRJNST,Volume:04-Issue2(2026)/ISSNP:2790-7643ArticleID:2055https://doi.org/10.53762/grjnst.04.02.07G.2055ESGratingonthechangeinthefinancialperformanceismeasuredusingtheregressionanalysis.Page103.8EthicalConsiderationsThepaperhasalsobeenethicalintermsofresearchasitemploysinformationthatispubliclyavailableandisaccurateinitsanalysisandreporting.Nopersonalorconfidentialinformationisdealtwithandtheinformationisonlyutilizedinacademicuse.Overall,itispossibletosaythatthismethodologicalframeoffersastrictandthoroughlyorganizedanalysisoftherelationshipbetweenESGratingandthefinancialsuccessofthemostpollutingindustries.4.ResultsandAnalysis4.1ESGRatingDistributionamongFirmsTable4.1:ESGRatingLevelsCategoryShare(%)HighESG38MediumESG42LowESG20ThedistributiondemonstratesthatthehighestpercentageoffirmsfallonthemediumcategoryofESGwhichimpliesthatahighnumberoforganizationsarecurrentlyintheprocessofembracingsustainabilitypracticesandareyettoattainhighlevelsofESGintegration.TheslightlylowerportionisthosehighESGperformerswhichmeansthatonlyasmallpercentageoffirmshavecompletelyadoptedsustainabilityintheirstrategicprocesses(Dasilas&Karanović,2025).GRJNST,Volume:04-Issue2(2026)/ISSNP:2790-7643ArticleID:2055https://doi.org/10.53762/grjnst.04.02.07G.2055Page11TheavailabilityofthesignificantportionoflowESGcategoryindicatesthatmanycompaniescontinuetoworkwithlittleenvironmentalandsocialconcerns.SuchdisparityindicatesthetransitionarynatureofESGimplementationinthehighlypollutingsectors,inwhichtheimprovementcanbeobservedbutnotuniversallyacrossthecompanies(Nguyenetal.,2021).4.2ProfitabilityComparisonBasedonESGRatingsTable4.2:ProfitabilitybyESGLevelESGLevelProfitMargin(%)HighESGFirmsMediumESGFirmsLowESGFirms181410TheprofitabilitycomparisonshowsthatthefinancialperformanceisgraduallygrowingwiththeimprovementofESGratings.ThehighESGscoresindicatethatfirmsshowstrongerprofitmargins,whichcouldbeexplainedbytheincreasedoperationalefficiency,trustofthestakeholders,andimprovedbrandimage.MediumESGfirmsarecharacterizedbymoderateprofitabilitywhichisapartialaccrualofsustainabilitypractices(Yinetal.,2023).Incontrast,lowESGfirmshavethepoorestfinancialperformance,whichcanbeexplainedbythefactthattheyhavemoreexposuretoenvironmentalrisks,regulatoryfines,andlossofinvestortrust.ThistrendimpliesthatESGpracticehasapositiveimpactonprofitability,buttheextenttowhichithasanGRJNST,Volume:04-Issue2(2026)/ISSNP:2790-7643ArticleID:2055https://doi.org/10.53762/grjnst.04.02.07G.2055effectisdifferentbasedontheextentofitsimplementation(Makridou,Doumpos&Lemonakis,2024).Page124.3MarketValueGrowthandESGPerformanceTable4.3:ESGandMarketGrowthESGCategoryGrowthRate(%)HighESG22MediumESG16LowESG11TheoutcomesshowthatESGperformanceissignificantlyrelatedtomarketvalueincrease.CompaniesenjoyingabetterESGscoreenjoymoregrowthinmarketvalueimplyingthatinvestorsaremorelikelytoinvestinafirmthatpracticessustainabilityandhasaresponsibleapproach.TheadvantageofmediumESGfirmsismoderategrowthastheyhavesemi-confidenceofinvestorswhereaslowESGfirmsarelosingbehindastheyareseentoberiskyandlesssustainable.GRJNST,Volume:04-Issue2(2026)/ISSNP:2790-7643ArticleID:2055https://doi.org/10.53762/grjnst.04.02.07G.2055Page13ThispatternunderlinestheincreasedroleoftheESGaspectsininvestmentchoices,especiallyinsectorsthathaveanimmenseeffectontheenvironment(Zhang&Jung,2023).4.4ESGCostBurdenversusFinancialReturnsTable4.4:CostandReturnComparisonIndicatorRatio(%)ESGCostIncrease26RevenueIncrease19WhentheESG-relatedcostsandrevenueincreasearecompared,itisobservedthattheincreaseincostsisgreaterthantheincreaseinimmediatefinancialreturnsinfirms.Thismeansthatsustainabilityprojectscanbeveryexpensivetostartwithintheregionofcleanertechnologies,systemsofcompliance,andsocialprograms.Theseexpensesmightdecreasetheprofitabilityintheshortrunbutarerequiredinthelongruntobecomelong-termsustainableandmanagetherisks(Naeem,Cankaya&Bildik,2022).ThedifferenceincostandrevenueisalsothereasonwhynotallfirmsarekeentoimplementESGpracticesvigorously,eventhoughitmayhavelong-termbenefits.GRJNST,Volume:04-Issue2(2026)/ISSNP:2790-7643ArticleID:2055https://doi.org/10.53762/grjnst.04.02.07G.2055Page144.5RiskReductionacrossESGCategoriesTable4.5:ESGandRiskReductionESGLevelRiskReduction(%)HighESGFirms30MediumESGFirms22LowESGFirms14TheresultsprovethatthestrongertheperformanceofESG,themorethedecreaseofbusinessrisks.CompaniesthathavegoodESGpracticeswillbeinabetterpositiontohandleenvironmentalcosts,regulationsaswellasoperationsthatarestable.ModeratereductioninriskisobservedinmediumESGfirmsmeaningthattheirsustainabilityinitiativesarepartiallyeffective(Song,2023).LowESGcompaniesdonothavemanyopportunitiestomitigaterisksand,thus,thesecompaniesaremoreexposedtothedangersofbeingsubjectedtoregulatoryfines,environmentalaccidents,andimagelosses.ThistrendshowstheroleoftheESGasariskmanagementinstrumentinthehighlypollutingsectors.GRJNST,Volume:04-Issue2(2026)/ISSNP:2790-7643ArticleID:2055https://doi.org/10.53762/grjnst.04.02.07G.2055Page154.6Short-TermandLong-TermFinancialImpactTable4.6:Time-BasedFinancialImpactTimeFrameImpact(%)Short-TermImpact12Long-TermImpact24Thecomparisonoftheshortandlong-termfinancialimpactssuggeststhat,thebenefitsofESGpracticesoccurmoreinthelong-term.Theshort-runfinancialreturnsarealsoquiteminimalastheimplementationandadjustmentcostisalsohigh.However,thelong-runeffectismorecriticalsincethecompanieswillhaveanimprovedefficiency,reducedrisk,andproductivityinthemarket.ThismeansthatESGshouldbeviewedasalongterminvestmentandnotadirectprofitmakingventureespeciallyinahighlyenvironmentalindustry(Chen,Song&Gao,2023).GRJNST,Volume:04-Issue2(2026)/ISSNP:2790-7643ArticleID:2055https://doi.org/10.53762/grjnst.04.02.07G.2055Page16Overall,theresultshighlightthesystematictrendaccordingtowhichthehigherthelevelofESGperformance,thehigherfinancialperformance,thehighermarketgrowthandreducedrisks(Li,Tang&Li,2024).However,thefindingsalsoindicatethatthebenefitsofESGaremorepronouncedinthelong-term,andshort-termfinancialconstraintswiththehighlypollutingbusinessesisachallengetocorporations.5.DiscussionThefindingsofthisstudyarelargelycoherentandcomplementarytotheliteratureontherelationshipbetweenESGperformanceandfinancialperformanceparticularlywhenitcomestohighlypollutingindustries.TheresultsshowthatthemaximizationofprofitabilityandgrowthofthemarketvaluesofthecompanieswiththehighscoreintheirESGscaleareconsistentwiththepointsmadebyClarksonetal.whobelievethatthehighlevelofenvironmentaldisclosureselevatesthelevelofinvestortrustandvaluationofthecompanies.ThecurrentfindingssupportthisviewsincetheyshowhighESGcompaniesnotonlygainthetrustofthemarketbutalsotranslatethetrustintosomemeasurablemonetarygains.ThispaperhowevershowsthatthereisyetanotherchannelbywhichESGinfluencesfinancialperformance;transparencyhasbeenshowntoplayavitalrole,inthisinstance,byClarksonetal.,however,operationalefficiencyandriskmanagementwerealsoidentifiedtohaveasignificantcorrelationwiththeincreaseinperformance.Similarly,theESGperformanceversustheprofitabilityinthisresearchispositiveandinagreementwiththeargumentofPavaandKrauszwhoopinethatasociallyresponsiblefirmmightperformevenaswellasalesssociallyresponsiblefirmorevenbetter.TheabovestatementisconfirmedbythecurrentevidencewhichprovidesempiricaldatathathighESGcompanies,incomparisontolowESGcompanies,earnsignificantlyhigherGRJNST,Volume:04-Issue2(2026)/ISSNP:2790-7643ArticleID:2055https://doi.org/10.53762/grjnst.04.02.07G.2055Page17profitmargins.However,thespecifiedstudyintroducessomecomplexityintothefactthatmentionedadvantagesofprofitabilityarenotfeltimmediately,astheytypicallycomealongwiththeaddedcostsoftheirimplementationattheverybeginning,whichisanotherpointthatpriorresearchhasnotexaminedtoacertaindegree.TheobtainedoutcomesarealsoreflectedinthetheoreticalperspectiveofShrivastavawhointerpretstheproblemofenvironmentalresponsibilityasastrategicinvestmentratherthanaregulatoryexpense.ThispointofargumentissupportedbythedifferenceobservedbetweenincreaseincostrelatedtoESGandtheincreaseinrevenuesasbusinessesusemorefinancesintheshortrunbutreapthefinancialbenefitsinthelong-run.ThisstudyrenderstherecommendationofShrivastavamoreconcretebydemonstratingempiricallythatthelong-termfinancialimpactismuchmoresignificantthanshort-termbenefits,hencethestrategicneedofthesustainabilityintegrationinthehigh-impactindustries.IncomparisontoESGdisclosures,theresultsareconsistentwiththoseobtainedbyChristensenwhonotesthatqualityandcredibilityofESGreportingaffectsafinancialperformance.Inthepresentstudy,thedisclosurequalityhasnotbeendirectlymeasured,butthehighESGfirmsareperformingmorewell,whichmeansthatviableandstandardizedESGpracticescanprobablyresultinimprovedfinancialperformance.Inthemeantime,thestandarddeviationoffirmsimpliesthatnotallESGinitiativeswouldpositivelyimpactanorganizationequally,which,initsturn,isaconcessionmadetotheargumentofChristensenthatsuperficialorformalESGinitiativeswouldnothavenecessarilyresultedinthefirmbecomingafinancialsuccess.ThestudyfindingsontheincreaseinmarketvalueandinvestorchoiceareveryparallelwiththestudyconductedbyChengetal.thatfindthatfirmswithhigherESGratingfacefewercapitalconstraintsandaremorepronetoreceiveadditionalinvestment.ThehighergrowthratesofhighESGfirmspresentedinthispaperrevealthattheinvestorsoftheheavilypollutingindustriesattachrisingimportanceonthesustainabilitypractice.ThisdemonstratesthefactthatESGisperceivedtobeapointerofreducedriskandsustainabilityinthelong-runthatenhancestheattractivenessofsuchenterprisesinthefinancialmarkets.However,thepresentstudyalsoindicatesthatitisstrongerintheindustrythatismoreenvironmentalsensitive,withthesenseofESGfactorsplayingabiggerroleintheinvestmentprocess.Cohenetal.alsojustifytheroleofESGinthereductionofrisksthatwereidentifiedinthestudybymentioningthataneffectivewaytoenhancethesustainabilitypracticesisthroughawell-organizedgovernance.ThelargermitigationofriskthatisobservedinthehighESGfirmsuggeststhattheaspectofgovernanceaspartofESG,hasaGRJNST,Volume:04-Issue2(2026)/ISSNP:2790-7643ArticleID:2055https://doi.org/10.53762/grjnst.04.02.07G.2055Page18significantroletoplayinthemanagementoftheenvironmentalandoperationalrisk.Theirfindingsaresubsequentlyextendedinthisstudywhichdisclosesthatriskcontainmentisnotonlyagovernanceoutcome,butalsoacoordinatedreactiontobothenvironmentalandsocialprocedures,andinthemajorityofsectorswhicharevulnerabletoahighdegreeofenvironmentalliabilities.Toagreaterextent,theresultscanalsobeviewedasreflectiveofthewholeCSRperspectivebyAguinisandGlavaswhosuggestthatthecorporatesocialresponsibilitypromotestherelationsofthestakeholdersandtheoverallperformanceofthefirm.ThesuperiorprofitabilityandstockvaluesofhighESGbusinessesinthispaperspecificallyintheindustrieswiththehighestperceptionofpeopleandregulationconfirmthisargument.However,theavailabledataalsoindicatesthatstakeholderbenefitsarenotdistributedequallysincemediumandlowESGcompaniesarenotabletoenjoythesamefinancialaccoladeswhichmeansthatthestrengthandhomogeneityofESGapplicationisadecisivefactor.6.ConclusionThecurrentstudysoughttoexaminethisrelationshipbetweenESGperformanceandfinancialperformanceinthoseindustriescharacterizedbyhugeproductionofpollutants,namelyprofitability,marketvalue,costimplicationaswellasriskreduction.ThefindingsprovideafairindicationthattheESGperformancemayturnouttobeaneffectivepredictoroffinanciallysuccessfulperformancewithacomplicatedandtime-specificeffect.IthasbeenobservedthatcompanieswithgoodESGscoresaremoreprofitableandhavehighermarketvaluegrowthbesidestheirlowerexposuretorisk,ascomparedtoothercompanieswhoseESGactivitiesarelow.ThatconfirmstheconceptthatESGisnotjustaregulatoryorethicalnecessity,butalong-termvaluecreationsource.However,itisalsofoundinthestudythatagreattrade-offexistsbetweenfinancialperformanceintheshorttermandlong-termsustainabilitybenefits.TheinvestmentsrelatedtoESGareconnectedwiththehighinitialcost,whichtendstoexceedtheimmediaterevenuereturnsand,inthemeantime,reducestheprofitmargins.Thatiswhyevennowadays,therearecompanieswhicharenotreadytoadoptESGfullydespiteitsbenefitsinthelongterm.ThefindingsrevealthatESGshouldbeusedlong-termstrategicperspective,withoutbeingusedasafinancialindicator,especiallyintheareaofexceedinglyhighenvironmentalperformanceandgovernmentalimpact.GRJNST,Volume:04-Issue2(2026)/ISSNP:2790-7643ArticleID:2055https://doi.org/10.53762/grjnst.04.02.07G.2055Page19Inaddition,theresultssuggestthattherelationshipbetweentheESGandthefinancialperformanceisnotalwayspresentineveryfirm.ThevariationinESGoutcomesdemonstratesthatthecontextualfactorssuchassizeofafirm,standardofgovernanceandmarketsetupdictatetheeffectivenessorineffectivenessofsustainabilitypractices.Withimprovedsystemofgovernanceandbetterresourcebase,suchcompanieshavegreateropportunitiesofsuccessfullyincorporatingESGintheiroperationsandachievingpositivefinancialperformance.ThisgoestoaffirmtheideathattheESGperformancecanalsobelinkedtonotonlyadoption,butalsothequalityandconsistencyoftheimplementation.Inmostcases,theresearchisanadditiontotheexistingbodyofliteraturebyprovidinginformationregardingtheindustryinquestionwhichisheavilypollutingbuthasbeenunder-representedinthepast.ItconfirmsthatESGpracticesenhancethefinancialperformanceindifferentchannelsincludingefficienciesandconfidenceoftheinvestorsandreduceoperationalrisks.Atthesametime,italsoputsemphasisontheimportanceofcost-to-weigh-offbalancebetweenpricingstrategyandlong-termstrategicbenefitssinceitoffersahealthierimageofESGinshapingthecorporateperformance.7.RecommendationsBasedonthefindingsofthisstudy,onecanofferseveralpracticalandpolicy-relatedrecommendationstoensurethepracticesofESGbecomeefficientinthemostpollutingindustries.First,firmsshouldcapturealong-termstrategicpracticeofESGinvestmentascomparedtofocusingonshort-termfinancialsuccess.SincethepositiveimpactofESGisstrongerastimegoes,businesseshavetoembracesustainabilityintheirbusinessstrategiesanddecisionmaking.ThisinvolvesaligningtheobjectivesofESGwiththeoverallcorporateobjectivesinsuchawaythatsustainabilitywouldnotbeperceivedasaonetimeoracomplianceexercise.Second,theorganizationsaretoimprovequalityandreportingofESGs.Open,firmandinformationagreeablereportingcouldenforceasymmetrythatultimatelyresultsinenhancedfinancialperformance.Thesymbolicreportingisnotintendedtoberemainedbythecompanies,buttheactualandverifiableresultsoftheESG,whichmaycontributetothereputationpreservationandsubsequentlong-terminvestmentshouldbelistenedto.investorconfidenceandreduceThird,oneoftheprioritiesofthecompanies,whichoperateinhighlypollutedindustries,shouldbecost-effectiveESGimplementation.Eventhoughsustainabilityprogramscanbeassociatedwithmassiveinvestments,thecompaniescanminimizecostsGRJNST,Volume:04-Issue2(2026)/ISSNP:2790-7643ArticleID:2055https://doi.org/10.53762/grjnst.04.02.07G.2055Page20withthehelpofnewtechnologiesandprocessimprovementandmaximizeprofits.Toexplainthis,wecanobservethatthroughinvestmentsinenergysavingsystemsandwastereductionmeasuresandcleanerproductionmechanisms,itcanbeseenthatitispossibletominimizethecostofoperationinthelongrunbesidesimprovingtheperformanceoftheenvironment.Fourth,inordertoconductESGsuccessfullyacompanymustenhancecorporategovernancesystems.BusinessfirmsmustensurethatthegovernanceproceduresareorientedtoattainsustainabilitylikeestablishmentofspecialESGcommittees,accountabilityframeworks,andperformancemanagement.Goodgovernancemayhelptomakedecisionsinthemanagementlikethelong-termsustainabilitygoalsandimprovetheoverallperformanceoftheorganization.ReferencesDasilas,A.,&Karanović,G.(2025).TheroleofESGinhigh-pollution1.industries:implicationsformarketandfinancialperformance.Thejournalofriskfinance,26(3),410-427Nguyen,T.H.,Elmagrhi,M.H.,Ntim,C.G.,&Wu,Y.(2021).Environmental2.performance,sustainability,governanceandfinancialperformance:EvidencefromheavilypollutingindustriesinChina.BusinessStrategyandtheEnvironment,30(5),2313-2331.3.Yin,F.,Xiao,Y.,Cao,R.,&Zhang,J.(2023).ImpactsofESGdisclosureoncorporatecarbonperformance:empiricalevidencefromlistedcompaniesinheavypollutionindustries.Sustainability,15(21),15296.4.Makridou,G.,Doumpos,M.,&Lemonakis,C.(2024).RelationshipbetweenESGandcorporatefinancialperforma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