The influence of ESG score on financial performance: evidence from the European health care industry

Company managers are increasingly recognizing that sustainable practices are not just ethical imperatives but potential drivers of long-term value. To determine the degree to which this is grounded in business reality, a growing body of empirical studies have examined whether higher environmental, social, and governance (ESG) performance predicts better financial performance. However, conflicting findings have emerged, with reviews highlighting the role that methodological choices, normative setting, and industry can play in moderating that relationship. Unlike other industries, health care has been the focus of only a handful of heterogeneous quantitative studies. To contribute to this evidence base for the European context, the present study comprehensively examined whether and how ESG score can influence both accounting- and market-based measures of financial performance. Company data from the top health care companies listed in the STOXX 600 Index over the last decade (2012–2022) were gathered and analyzed. The analysis results confirmed that a marked heterogeneity of effects across the different ESG scores and measures of financial performance exists, which is not merely due to differences in empirical strategy, with modest positive effects being estimated in most cases. Of the three pillars, the governance score consistently predicted more positive financial performance among the sample of listed European companies. The environmental pillar score only influenced accounting-based measures, though inconsistently, whereas the social pillar did not seem to have any predicting role for accounting-based measures. Future research should consider replicating the proposed analytical framework in other data settings and normative contexts to strengthen the current evidence base and therefore deepen our understanding of the mechanisms underlying the investigated relationships in the health care industry.