2
Table of Contents
I. The Context ................................................................................................................................ 5
II. Introduction .............................................................................................................................. 6
Thesis Statement........................................................................................................................ 7
Hypothesis .................................................................................................................................. 8
Sustainable Investing Approaches and Strategies.................................................................. 8
ESG Integration......................................................................................................................... 8
Impact Investing ........................................................................................................................ 9
Environmental Sustainability ............................................................................................. 10
Social Equity ........................................................................................................................ 10
Economic Development ....................................................................................................... 10
Thematic Investing .................................................................................................................. 11
Clean Energy ........................................................................................................................ 11
Sustainable Consumption ................................................................................................... 11
Healthcare Innovation ......................................................................................................... 11
Engagement and Advocacy ................................................................................................. 12
III. Literature Review ................................................................................................................. 13
IV. Methodology.......................................................................................................................... 16
Qualitative Method ................................................................................................................. 16
Quantitative Analysis .............................................................................................................. 22
Data ....................................................................................................................................... 22
Methodology for Quantitative Analysis ............................................................................. 23
Limitations of the Research ................................................................................................ 23
V. Results and Discussion ........................................................................................................... 24
Correlation Results ................................................................................................................. 25
VI. Recommendations and Conclusions ................................................................................... 29
References .................................................................................................................................... 32

3
List of Abbreviations
Abbreviation

Definition

CDP

Carbon Disclosure Report

CNRL

Canadian Natural Resources Limited

EIA

Environmental Impact Assessments

ERM

Enterprise Risk Management

EPS

Earnings per Share

ESG

Environmental, Social, and Governance

GHG

Greenhouse Gas

GRI

Global Reporting Initiative

GSIA

Global Sustainable Investment Alliance

HSE

Health, Safety, and Environment

OECD

The Organization for Economic Cooperation and Development

ORM

Operational Risk Management

PRI

Principles for Responsible Investment

R&D

Research and Development

SASB

Sustainability Accounting Standards Board

SDG

Sustainable Development Goals

SRI

Socially Responsible Investment

4
STEM

Science, Technology, Engineering, and Mathematics

TCFD

Task Force on Climate-Related Financial Disclosures

UN

United Nations

WFE

World Federation of Exchanges

5
I. The Context
The concept of sustainable investing originated from the socially responsible investment
(SRI) movement of the 1960s and 1970s. This movement initially aimed to exclude corporations
involved in activities considered immoral or detrimental, like weapons, tobacco, and South
Africa during the apartheid-era (Sandberg et al., 2019). Since Environmental, Social, and
Governance (ESG) factors have a significant impact on investment performance, the idea has
evolved over time to include them. Evaluating a company's environmental impact involves
considering areas like waste management, energy efficiency, and carbon emissions. Social
factors include aspects like community relations, human rights, and work practices. The structure
and transparency of a company's management are components of governance.
Due to investors' growing awareness of the impact of ESG factors on risk and return,
there is an increasing demand for sustainable investments. The EU's Sustainable Finance Action
Plan is one regulatory attempt that aims to advance sustainability in the financial system and
encourage adoption of ESG principles. Corporate leadership plays a significant role as many
companies include sustainability in their plans to enhance stakeholder value creation and
participation.
There are still issues with ESG data availability and accuracy, including ESG factors in
investment decision-making, measuring and disclosing social and environmental consequences.
Sustainable investing, on the other hand, offers chances to manage risk, match financial goals
with favourable social and environmental consequences, and produce long-term value for
investors and society in general in a better manner.

6
II. Introduction
Sustainable finance, driven by considerations of ESG factors, has gained momentum as
investors increasingly seek both financial returns and positive societal and environmental
impacts. This strategy aims to achieve long-term benefits while aligning with the values of
investors by incorporating ESG considerations into decision-making processes. The three main
goals of ESG investing are risk management, portfolio return enhancement, and social issues,
including inclusive governance and climate change. Yet, there are still issues in efficiently
disseminating ESG data and incorporating it into financial choices. There are still incorrect
assumptions about how ESG factors affect financial results, even as investors and financial
intermediaries are adopting them more and more in their operations. Even if there is evidence
that ESG-oriented investments can improve the societal impact without lowering financial
returns, further investigation is required to fully understand how their contributions can lead to
value creation over the long term.
Adopting uniform methods internationally is made more difficult by the absence of
defined ESG language and protocols. ESG investing methods come in a variety of forms, such as
integration with other investment philosophies, portfolio tilting depending on ESG scores, and
positive or negative screening. The seamless incorporation of ESG considerations into investing
decisions is hampered by issues with materiality, consistency, and uniform disclosures. The
Organization for Economic Cooperation and Development (OECD) has been actively involved
in advancing sustainable finance and ESG integration through consultations, studies, and
guidelines for responsible investing. Significant obstacles still exist, though, such as the
requirement for more consistency, transparency, and comprehension of ESG factors by financial
consumers. For sustainable finance to fulfill its promise of producing both financial rewards and
societal benefits with better results, these issues must be handled.

7
Thesis Statement
Through recommendations for institutional investors, reports on investment governance
and ESG integration and through consultations on ESG factors integration into pension fund
management the OECD has played a prominent role in the promotion of these investments. The
primary rationale for conducting this study is to determine the relationship between finance and
sustainability by investigating investment strategies while giving preference to such practices
that are known to give the desired financial returns and positive environmental and social effects
(Boffo & Patalano, 2020). The study, being mixed in nature, combines the qualitative and
quantitative approaches, and aims to come up with findings that guide investment decisions
through the implementation of sustainability investment strategies and the use of sustainable
finance mechanisms and products for obtaining greater financial returns over a period. This study
takes the afore-mentioned OECD report as a basis for furthering the research and analysis and
aims to add value to the finding by focusing specifically on just one industry and one country,
namely the energy sector in Canada, particularly.
Even though manufacturing, technology, and natural resources are all strongly connected
with the Canadian economy, the energy sector serves as the primary driving force. Utilizing
Canada's abundant resources, which include lumber, oil, gold, copper, and gas, sectors like
mining, forestry, and oil and gas play significant roles in this industry. The energy sector is
continuing to grow as a big contributor to Canada's economy by means of the extraction,
processing, and utilization of natural resources for trade, which historically has generated
substantial revenue and potential for employment (Webster, 2023). Finally, the study is meant to
prove that investing in sustainability not only seems to be the most morally and ethically
desirable option but also the most financially sound alternative that offers a chance of obtaining
higher risk-adjusted returns in the long run.

8
Hypothesis
According to the proposed hypothesis, there is a correlation between the ESG ratings and
the net income of the companies in the energy sector of Canada, assuming the relationship is
linear and considering the limitation of data.
Sustainable Investing Approaches and Strategies
ESG Integration
ESG integration has become the de-facto approach in sustainable investing, as the basic
principle is that ESG factors can potentially be the drivers of the financial performance and risk
profile of a company (Schramade, 2016). This strategy implies the proactive infusing of ESG
considerations into the traditional financial analysis by the virtue of which no investment
decisions are made unless ESG aspects are appropriately considered. The ESG analytical part
includes the collection of data on ESG from different sources such as the company’s disclosures,
ratings by third parties and industry-specific research. Investors' attention is directed at assessing
a company's performance against different ESG criteria, including emissions of carbon dioxide,
labor standards, diversity in the board, and business ethics (Meng & Shaikh, 2023). Through
ESG performance assessment, investors can know the risks and chances of the company, both
positive and negative, which have influence on performance of the company for long-term. In
addition to that, ESG integration includes the identification of materiality of ESG factors and
how they relate to the business activity of the company and economic environment in which the
company is. Investors must therefore have to determine which ESG factors are financially
material to a company's operations and stakeholders and then identifies how these factors may
affect the company's financial performance and competitive positioning (Meng & Shaikh, 2023).
It is a challenging monitoring as it is about the ability to see the subtleties of the industry, how it

9
is regulated, and what the expectations of the stakeholders are so that one can see the risks and
opportunities which might not be in the financial statements.
The other important part of ESG integration is scenario analysis, this facilitates asset
managers to conclude the financial consequences of different sustainability cases on companies'
operations and investment opportunities. Conversely, the investors may try to assess the
economic effects of climate change rules on companies, interruptions of supply chains and social
unrest on the company’s earnings, cash flows and value. Sustainability risk and opportunity
scenario analyses contribute to an investor’s decision to invest in a company while the investor
monitors the risk-reward profile of his investments. Moreover, communication and engagement
with the companies are the important parts of ESG integration, as they allow investors to affect
the corporate behavior and the sustainability of its practices through strive for the best changes in
the ESG areas (Pursele, 2023). Investors communicate with company managements and board of
directors to pursue better ESG outcome, transparency, and disclosure. This engagement requires
addressing ESG questions together by listening to specific environmental practices management,
human rights policies and executive compensation schemes of investors and stakeholders
(Pursele, 2023). For positive interaction, investors push firms to be more sustainable which is not
only profitable but also makes their success in the eye of financial and ESG notions.
Impact Investing
However, impact investing is fast becoming a growing trend to improve the environment
and social sector and to achieve profitability uniquely, impact investing has a different scope
from the traditional philanthropy, which simply gives out donations or grants (Pola Nachyła &
Justo, 2024). In contrast, the impact investing invests the capital in companies that can address
the social and environmental issues. Impact investors prioritize investments that generate
measurable and sustainable social and environmental benefits, such as:

10
Environmental Sustainability
Investors of impact finance companies fund projects that promote climate sustainability
such as renewable energy, energy efficiency upgrades, conservation, and others (Pola Nachyła &
Justo, 2024). The aim of the above-mentioned funding programs is to alleviate the issue of
climate change, pollution, and preservation of natural ecosystems for investors.
Social Equity
The investors in the impact funds are attracted by projects aimed at promoting social
justice and inclusiveness, which focus on low-cost housing, health care accessibility, and
education among others. The investment is set to bring the estimated equality, quality of life and
economic opportunities to the underprivileged through financial gains to the investors.
Economic Development
The Impact investors are the people who invest in projects and companies that they think
stimulate economic development and create work in communities that are not well catered for by
the mainstream industry for example, social enterprises community development projects and
microfinance institutions (Pola Nachyła & Justo, 2024). The objective is to establish business,
augment employment creation, maintain small-scale enterprises and stimulate local economies in
the creation of investment opportunities for investors.
Impact investing is founded on the concept of measurable outcomes and accountability,
where investors want to establish measurable results and impacts through standardized metrics
and reports. It facilitates investors to examine the return of this investment and make the policies
of getting the maximum results within the defined time span.

11
Thematic Investing
The practice of thematic investing is now a popular strategy that makes it possible for the
investors to pinpoint the investment opportunities related to ecological themes and mega-trends
which are expected to be the driving forces of the world economy in the long run as they
transform the ideas into reality. Thematic investors identify emerging trends and invest in
companies that are well-positioned to capitalize on these trends, such as:
Clean Energy
The investment theme investors look at companies that operate in green energy
production, energy storage technologies, electric vehicles, and smart grid infrastructures. The
purpose of such investments is to accelerate the switch to the clean-energy economy, help the
countries resolve the dependence on fossil fuels, and reduce the environmental impact of climate
change as for one side, and to provide the investors with the financial returns as for the second
side.
Sustainable Consumption
Thematic investors invest in companies that rethink the issues of food sustainability
production, ethical fashion, sustainable packaging, and circularity. Such initiatives try to increase
efficiency and minimize the waste of resources through the adoption of sustainable consumption
patterns, circular economy, and the transition to a regenerative economy.
Healthcare Innovation
Thematic investors look for companies who are doing research in health care technology,
personalized medicine, and disease prevention, and try to improve the way medicine is delivered
(Stefanicka-Wojtas & Kurpas, 2023). These investments are geared towards the provision of
quality health services delivery, meeting health care needs and the improvement of overall health

12
outcomes of the public. Furthermore, the investors may also benefit financially from the
proceeds of the investments.
A thematic approach gives more opportunities to investors to join industries and sectors
where growth is highly desirable, what also contributes to sustainability and responsible
innovation. With the presence of business companies which are strongly focused on solving the
world’s most urgent problems, thematic investors try to obtain admirable results of financial
statements and at the same time to create positive social and environmental outcome.
Engagement and Advocacy
With participation and commitment, venture capitalists can impact company practices
that support environmental, social, and governance (ESG) challenges. Proactively interacting
with businesses to evaluate ESG risks and opportunities is known as stakeholder interaction, and
it improves performance and transparency. Meetings with management, attending shareholder
meetings, proposing resolutions, and working with stakeholders are examples of engagement
mechanisms (Serafeim, 2020).
Entire industry spanning groups are frequently involved in advocacy campaigns. To
advance ESG norms, launch initiatives, and manage systemic risks, investors collaborate with
associations, legislators, and regulatory agencies. Investors can promote sustainable development
at the corporate and systemic levels by active participation (Serafeim, 2020). Investors leverage
firms to raise ESG rankings and generate long-term value by increasing ownership. ESG
integration, impact investing, advocacy, and other strategies are all part of socially responsible
investing, which supports environmental, social, and governance goals in addition to financial
ones.

13
III. Literature Review
A critical analysis of the financial materiality of ESG aspects has been prompted by the
growing importance of these concerns in investment discourse, especially in the Canadian energy
sector. This industry, which is well-known for having a big influence on the environment and
society, has emerged as a key resource for learning how financial performance and
environmental concerns connect. Stakeholders in law, regulation, and business are becoming
more and more aware of the need to incorporate ESG measures into frameworks for making
investment decisions to maximize returns and improve risk management (SASB Standards
Overview - SASB, 2023).
Several studies highlight the positive relationship between ESG performance and
financial results in different industry including the energy industry (Naeem & Çankaya, 2022).
Strong evidence from meta-analyses indicates that businesses with strong ESG policies typically
have better stock performance and operational efficiency, among other financial performance
measures (Fidelity International, 2021). This relationship is further supported by Halid et al.
(2023), which shows how companies in the energy sector that have higher ESG scores
outperform industry benchmarks. This trend emphasizes the understanding that resilient and
sustainable value generation within the energy industry are directly related to the efficient
management of ESG risks and opportunities.
Furthermore, a study conducted recently by Pulino et al. (2022) clarifies how financial
resource mobilization in the energy sector is affected by ESG performance. Their results imply
that improved access to financial resources is positively correlated with improved ESG
performance, suggesting that investors are increasingly directing capital toward businesses with
good ESG credentials. Furthermore, Baran et al. (2022) draw attention to how ESG integration

14
promotes resilience and innovation in the energy sector, which helps to ensure long-term
financial sustainability.
ESG's financial relevance goes beyond stock markets to include fixed-income assets and
more general economic considerations. Initiatives like the UN Principles for Responsible
Investment (Pri, 2024) demonstrate the dedication of stakeholders, which highlights the
increasing trend of including ESG factors into credit evaluations and more comprehensive
investment plans. Furthermore, improvements in data transparency and ESG reporting, as
demonstrated by programs like the World Bank's sovereign ESG database, help investors make
well-informed decisions when evaluating the sustainability performance of nations in the energy
sector (World Bank, n.d.).
The integration of ESG considerations into decision-making processes is prompted by
ESG scores, which play a crucial role in enabling investors and market participants to convert
ESG disclosure into practical investment products (Tayan et al., 2022). Gaining an understanding
of the complexities behind ESG ratings and how they are converted into indices is crucial to
comprehending the dynamics of ESG assessment in the financial sector. There are many
different approaches used to award absolute and relative scores across sectors, including data
selection, metric weighting, and the use of subjective assessment (Tayan et al., 2022). Although
there are methodological differences between Bloomberg, Morningstar, and MSCI, the overall
goal of ESG ratings is still the same, highlighting businesses that are doing exceptionally well in
terms of ESG.
ESG issues are the main criteria used to calculate ESG scores. The relative relevance of
each element is determined by the particulars of the industry (Lee & Suh, 2022). Resource
depletion, carbon emissions, and sustainability measures are examples of environmental

15
challenges, whereas worker welfare, human rights, and community involvement are examples of
social factors.The three main pillars of governance are accounting standards, transparency, and
corporate governance practices (Lee & Suh, 2022). Techniques are carefully upheld to guarantee
thorough assessments of ESG performance, combining components from every dimension to
offer insights into ethical behavior and sustainability practices (Liu et al., 2023). By using these
ratings, investors can align their beliefs and investing goals with companies that have similar
ESG policies, creating a mutually beneficial interaction between corporations and ESG-aware
investors.
Halid et al. (2023) emphasized on how transparency and stakeholder participation are
enhanced by ESG reporting. His study added to the understanding of how ESG affects company
success, especially in the areas of operations and finance, also highlighting the continuous
discussion about the connection between them and the need for more research to reach a
consensus.
The study explores the relationship between ESG performance and corporate value and
profitability, revealing some notable positive relationships, particularly related to Social and
governance elements, which may be linked to long-term impacts and higher costs. These
findings highlight the importance of ESG for all parties involved, pointing to possible
competitive benefits for businesses that perform better than expected especially in times of crisis
and suggesting directions for future research that look at the variables influencing ESG's impact
on financial performance (Aydoğmuş et al., 2022).

16
IV. Methodology
Qualitative Method
A questionnaire was created and distributed to provide a qualitative assessment in
addition to the quantitative analysis. Despite efforts to receive responses from different
individuals across the author’s network, the response rate was very limited, with feedback
received from only two people. Even though the sample size was lower than expected the
information these respondents shared was extremely valuable. Their viewpoints and criticisms
contributed insightful qualitative information that deepened my understanding of the subject
matter and revealed ambiguities about the research design, conclusions, and its ramifications.
Though getting a larger sample size can be difficult, the input from these people makes the
analysis more comprehensive by guaranteeing that the research process considers both
qualitative and quantitative notions.
The filled questionnaires are mentioned below.
Questionnaire 1
Questionnaire for Sustainable Investing and ESG Perceptions
I appreciate you taking the time to complete my sustainable investing survey. I will learn more
about the connection between financial performance and sustainable investment strategies thanks
to your replies. Please provide the most accurate response you can to the following questions.
Personal Information
Name: Afshin Doust
Contact Number and/or Email: adoust@gmail.com
Designation: Founder

17
Organisation: Hera Investment Funds
Location: North Vancouver, BC, Canada
Sustainable Investment Experience:
To what extent do you understand the idea of sustainable investing?
 Very Familiar
☐ Somewhat Familiar
☐ Not Very Familiar
☐ Not Familiar at all
Have you personally participated in ESG-related decision-making or sustainable investing inside
your company?
 Yes
☐ No
Investment Decision Making
What aspects do you think are most crucial when choosing an investment? (Choose up to 3)
 Financial Returns
 Environmental Impact
 Ethical Factors
☐ Governance

18
 Legal & Regulatory Practices
☐ Social Concerns
☐ Others (Please Specify):
Opportunities and Challenges of Sustainable Investing
What hurdles do you think stand in the way of effectively applying sustainable investment
strategies into execution?
Knowledge and proper identification of opportunities.
Are there some specific benefits or possibilities that you connect with sustainable investing? Tell
me more about it, please.
Sustainability of the investments and impact driven strategies which help align goals with
societal impact create buy in from all stakeholders and create win win situations for fund
managers, investors, and society as a whole.
Reporting and Data
How do you obtain and apply reporting and data on sustainability to your investment choices?
We measure sustainability based on carbon footprint measurement and fund sustainability.
Do you think any standards or frameworks for sustainability reporting can be helpful for
evaluating the sustainability performance of a business? For example, GRI, TCFD, SASB, and
CDP
Yes, they can all be useful if used in the right opportunity.
Additional Information

19
What other thoughts or observations do you have about the relationship between sustainable
investing and financial performance?
They go hand in hand and help each other.

Thank you for taking the time to respond to my questionnaire. I will use your answers for my
further study of sustainable investing. I am grateful for your participation. Please don't hesitate to
get in touch with me if you have any more suggestions or would like to offer more details.
Questionnaire 2
Questionnaire for Sustainable Investing and ESG Perceptions
I appreciate you taking the time to complete my sustainable investing survey. I will learn more
about the connection between financial performance and sustainable investment strategies thanks
to your replies. Please provide the most accurate response you can to the following questions.
Personal Information
Name: Raul Ojeda
Contact Number and/or Email: raul.gabriel@myucwest.ca
Designation: Sessional Faculty / FNCE 630: Sustainability and Finance Course Leader
Organisation: UCW
Location: Vancouver, BC
Sustainable Investment Experience:
To what extent do you understand the idea of sustainable investing?

20
 Very Familiar
☐ Somewhat Familiar
☐ Not Very Familiar
☐ Not Familiar at all
Have you personally participated in ESG-related decision-making or sustainable investing inside
your company?
☐ Yes
 No
Investment Decision Making
What aspects do you think are most crucial when choosing an investment? (Choose up to 3)
 Financial Returns
 Environmental Impact
☐ Ethical Factors
☐ Governance
☐ Legal & Regulatory Practices
 Social Concerns
☐ Others (Please Specify):
Opportunities and Challenges of Sustainable Investing

21
What hurdles do you think stand in the way of effectively applying sustainable investment
strategies into execution?
I don’t have much experience with poor execution of sustainable investment strategies, so I can’t
really comment on this. Without any proper evidence, my intuition tells me that failure in
execution may be caused by lack of proper measurability (numbers, metrics, indicators, etc.) of
the ‘S’ and ‘G’ factors when using the ESG framework.
Are there some specific benefits or possibilities that you connect with sustainable investing? Tell
me more about it, please.
Yes, many benefits from the environmental and social side, obviously, but many possibilities in
terms of financial returns and profitability as well, just looking at how much momentum ESG
has gained in recent times, from large financial institutions (including systemically important
banks) to institutional investors and asset managers.
Reporting and Data
How do you obtain and apply reporting and data on sustainability to your investment choices?
For listed companies (like financial institutions, for example) the main sources would be SASB
disclosure reports, annual reports, ESG reports, etc.
Do you think any standards or frameworks for sustainability reporting can be helpful for
evaluating the sustainability performance of a business? For example, GRI, TCFD, SASB, and
CDP
Yes. In terms of measurability of sustainability risks (particularly the ‘S’ factors of the ESG
framework), SASB would be the most helpful, as it provides metrics that are relevant to the
industry that a company is sitting within.

22
Additional Information
What other thoughts or observations do you have about the relationship between sustainable
investing and financial performance?
My hypothesis is that there is a positive correlation between them. It would be very interesting if,
as part of your research, you were able to collect financial data from sustainable and nonsustainable investments and make a quantitative assessment of that hypothesis (a significant
relationship between higher levels of sustainability and higher financial returns). Without having
tested that hypothesis myself, based on my observations of what BlackRock and other large asset
managers are doing, there is a massive shift towards ESG investing, so I am guessing high
financial returns are definitely there.

Thank you for taking the time to respond to my questionnaire. I will use your answers for my
further study of sustainable investing. I am grateful for your participation. Please don't hesitate to
get in touch with me if you have any more suggestions or would like to offer more details.
Quantitative Analysis
Data
For this research, the top 10 Canadian energy corporations ESG scores were obtained
from the S&P Global website for the year 2023 (Carpenter, 2022), (Sustainable1 Solutions: ESG
Scores | S&P Global, n.d.). The primary parts of an ESG score are Environmental (E), Social
(S), and Governance (G). These criteria evaluate how well a company performs with regards
to sustainability and ethical standards. Furthermore, financial data for the year 2023 was taken

23
over from Yahoo Finance website, which includes the profit margins and net income available to
common shareholders (Yahoo Is Part of the Yahoo Family of Brands, n.d.).
These measures provide information about the performance and financial well-being of
the companies under study. It is important to mention that the analysis was limited to one year of
data because only the ESG scores for the current year i.e., 2023, were available.
Methodology for Quantitative Analysis
Correlation and regression analysis were used to examine the relationship among the
financial variables where the dependent variables i.e., net income available to common
shareholders & profit margins and ESG scores which is the independent variable. To investigate
the direction and extent of a linear relationship between ESG scores and net income & profit
margins, Pearson correlation coefficients was computed using Microsoft Excel.
In addition, a regression model based on the independent variable of ESG ratings was
built, assuming linearity, to forecast the financial performance measures. The coefficients of the
linear equation were calculated using the regression from Data Analysis option in Microsoft
Excel, which sheds light on the relationship between ESG scores and financial performance
measures. The values of R, which is the correlation coefficient, p-values, R-square values are
generated when the regression option in data analysis is chosen. This is performed for each of the
variables i.e., with net income & profit margins separately. With the data, then a scattered graph
is also created with the trendline which is linear and has the equation and R-square value on the
graph.
Limitations of the Research
•

The Research paper’s on a single year's data might not fully encapsulate the wider trends
in ESG ratings and financial performance. The sample size is a little small, as the analysis

24
includes only 10 companies in the energy industry. More statistical power and possibly
more accurate estimates of the correlation between the ESG score and profit margin could
be obtained with a bigger sample size.
•

The assumption of a linear relationship between ESG ratings and net income/profit
margin could oversimplify their intricate interplay, potentially missing out on subtle
dynamics.

•

Despite considering a range of factors, the research might still miss out on key variables
beyond ESG ratings and financial metrics. The analysis did not cover all potential
variables that could affect net income and profit margin. Leaving out important factors
could affect the coefficient estimates and have an impact on how the results are
interpreted.

•

The foundation of this study is regression analysis, but any deviation from its
fundamental assumptions could impact the precision of the findings.

•

Finally, while the results provide insights into the correlation between ESG ratings and
financial metrics, their applicability to wider contexts might be constrained by the
specific nature of the data and the period analyzed.

V. Results and Discussion
The Main Data gathered for the purpose of this study is as follows:
Sl
No

Name of the
Company

1

Enbridge Inc
Canadian
Natural
Resources Ltd
TC Energy
Corporation

2
3

Net
Income
(In
Billion)
5.84

Profit
Margin

ESG
Score

Enviro
nmenta
l

So
cia
l

3.20%

56

45

62

Governa
nce &
Economi
c
62

8.23

8.58%

46

52

48

38

2.83

3.56%

48

43

39

62

25
Suncor Energy
8.30
6.95%
49
44
53
51
Inc
5 Cenovus Energy
4.07
6.16%
49
41
50
56
6
Imperial Oil
4.89
9.10%
37
41
38
31
Pembina
7
Pipeline
1.65
4.11%
45
46
43
46
Corporation
8
Tourmaline Oil
1.74
10.31%
43
46
31
49
9
Cameco
0.36
1.65%
38
40
33
41
10
Arc Resources
1.60
10.71%
40
41
36
42
Note. The data in this table are derived from “Stock lookup” by Yahoo! Inc. (n.d), retrieved from
4

https://ca.finance.yahoo.com/lookup and “ESG Scores” by Sustainable1 Solutions (n.d.),
retrieved from https://www.spglobal.com/esg/solutions/data-intelligence-esg-scores. The table
was created by the author.
The above data has the Net Income available to common shareholders, profit margins and
ESG scores for the ten energy companies in Canada for the year ended 2023, which were used
for generating further regression and correlation results.
Correlation Results
The summary of the results of correlation of the two parameters considered are
mentioned in the table below.

Variables
Net Income & ESG Score
Profit Margin & ESG
Score

Result of Correlation
R-Square
R Value
Value
0.4967
0.2468

PValue
0.1441

Regression Equation
Y = 1.0254X+41.049

0.1648

0.6491

Y = -0.0024X+0.2958

0.0272

Firstly, let us see the Correlation results conducted between the Net Income available to
common shareholders and ESG scores.
SUMMARY
OUTPUT

29
The regression equation Y = -0.0024X+0.2958 depicts that for every unit increase in the
ESG score, the profit margin decreases by 0.2958 units. The null hypothesis that the coefficient
is equal to zero, suggesting that the ESG score has no effect on profit margin, is tested using the
p-value connected to the independent variable's (ESG score) coefficient.
The ESG score coefficient in this instance has a p-value of 0.6491. The null hypothesis
cannot be rejected due to insufficient evidence, as indicated by a p-value greater than 0.05. This
implies that, at the 0.05 significance level, the ESG score is not statistically significant in
estimating profit margins. A linear graph has been created for better understanding of the above,
refer figure 2.

VI. Recommendations and Conclusions
Even while the research shows that ESG scores and financial performance measures like
net income and profit margin are positively correlated, some of these connections might not be
statistically significant. Though the hypothesis is proved right through net income to an extent,
because of the limitation of data, the profit margin reacted differently. Expanding the sample size
or considering other factors could be part of a future investigation to improve statistical
robustness of the findings.
The study assumes that financial performance measures and ESG scores follow a linear
relationship. It's possible, although, that the relationship is non-linear or shows thresholds, above
which further advancements in ESG might not have a major influence on financial results. To
capture more complex linkages, non-linear modeling strategies could be investigated in future
studies.
While the Canadian energy industry is the research's primary emphasis, other industries
might show differing levels of sensitivity to ESG concerns. To gain a deeper understanding of

30
how ESG performance affects financial results in various businesses and subsectors, more study
may incorporate sector-specific assessments. The study only uses data from 2023, which makes
it difficult to evaluate how ESG performance affects financial measures over the long run.
Studies that follow changes in financial performance and ESG scores over time may shed light
on how durable and sustainable the connections found are.
The report ignores other important ESG aspects including supply chain management,
diversity and inclusion, and ethical sourcing in the interest of concentrating solely on
environmental, social, and governance issues. Future studies could examine how these additional
ESG aspects affect organizational performance and investment decisions, as well as how
financially significant they are.
Comparative research assessing various countries or regions might shed some light into
the ways that market dynamics, cultural norms, and legal frameworks affect the connection
between ESG and financial performance. It may be possible to identify excellent practices and
areas for improvement by comparing Canadian energy corporations with their foreign
competitors.
Future research may enhance our comprehension of the financial significance of ESG
factors in the energy sector by addressing these suggestions. This will help develop investment
strategies that give priority to sustainability and long-term value.
In conclusion, the study demonstrates a positive correlation between the financial
performance of Canadian energy companies and their performance with respect to ESG scores.
On an overall basis, companies with higher ESG ratings have better financial results. However,
further research is necessary to fully understand these results and to determine the ways in which
various elements interact and grow over time.

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This study pointed out how important it is to take ESG considerations into account when
making financial decisions. It implies that incorporating sustainability into investing strategies
promotes value creation and long-term sustainability in addition to improving financial results.
Nevertheless, further study and analysis are required to completely comprehend these dynamics
and provide guidance for responsible investing strategies. Investors and businesses can help
promote good social and environmental change and enhance financial performance in the field of
sustainable finance by addressing these gaps and adopting a holistic approach to sustainability. It
is hoped that the findings of this study will help to contribute positively to growing body of
useful literature on the convergence of finance and sustainability in relation to investment
strategies.

32
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