Abstract
This study examines the relationship between Environmental, Social, and Governance (ESG) ratings and the financial performance of 20 mining companies listed on the Johannesburg Stock Exchange (JSE). As a vital contributor to South Africa’s economy, the mining sector faces growing stakeholder pressure to strengthen its sustainability reporting and operational practices. Adopting a quantitative research design, this study employs panel data covering the 2019–2024 period to analyse how ESG ratings influence financial performance. Key financial indicators Return on Assets (ROA), Return on Equity (ROE), and Tobin’s Q (TQ) are utilised to assess firm performance. ESG data were obtained from S&P Global, and panel regression techniques, including both fixed effects and random effects models, were applied. The Hausman test was conducted to determine the most appropriate model specification for each regression.
The empirical findings indicate that overall ESG scores exhibit a weak and statistically insignificant association with ROA and ROE, implying that ESG engagement does not substantially enhance accounting-based profitability for JSE-listed mining firms. Likewise, the link between ESG performance and Tobin’s Q was negative and statistically insignificant, suggesting that improvements in ESG practices may not immediately translate into higher market valuation. When the ESG dimensions were examined individually, the Environmental and Social components showed minimal effect, while the Governance component displayed a significant negative relationship with ROE. These outcomes highlight the nuanced and context-dependent influence of ESG activities in emerging market environments.
The study contributes to the emerging literature on ESG and corporate financial performance by offering insights specific to the South African mining sector. It also provides practical recommendations for investors, policymakers, and corporate executives, highlighting the need to integrate ESG initiatives to achieve sustainable and financial objectives.