Do ESG scores reflect financial performance? A confidence interval-based analysis of Nifty50 Companies

This paper examines the association between Environmental, Social, and Governance (ESG) risk scores and accounting-based measures of financial performance—specifically Return on Assets (ROA) and Return on Equity (ROE)—across a selected sample of Indian firms listed in the Nifty50 index. As ESG becomes an integral part of investment screening, understanding its financial implications is vital. Drawing on publicly available ESG risk ratings and financial data, this research applies statistical methods grounded in accounting theory and implements them using Python-based tools such as confidence interval estimation and t-tests. The analysis reveals that firms with higher ESG risk (lower ESG compliance) do not necessarily underperform; in fact, they show slightly higher average profitability. This introduces skepticism about the assumed short-term financial superiority of ESG-aligned companies and suggests a need for deeper accounting-integrated ESG analysis.