ESG Scores and Financial Performance in the Shipping Industry

Abstract

This thesis examines the relationship between environmental, social, and governance (ESG) performance and financial outcomes in the global shipping industry, based on panel data from 89 publicly listed firms between 2015 and 2024. Using fixed-effects panel regression and mediation analysis, the study investigates both direct and indirect associations involving ESG, operational efficiency, and financial performance. The results reveal that higher ESG scores - particularly the social and governance pillars - are positively associated with accounting-based metrics (ROA and ROE), while the relationship with market-based valuation (Tobin’s Q) is slightly negative, close to neutral. Mediation analysis suggests that operational efficiency partially explains these relationships. These findings suggest that ESG engagement may be associated with stronger internal performance, particularly when linked to improvements in operational efficiency. For corporate decision-makers, the results highlight that focusing on the social and governance pillars may be associated with enhanced operational efficiency, which can improve profitability. For investors, the findings indicate that ESG engagement can serve as a signal of firms with stronger internal financial performance. However, the results also underscore the complexity and context dependence of the ESG–finance relationship, reinforcing the need for careful and nuanced analysis. This study does not seek to validate ESG as a normative good, but to examine whether ESG scores are empirically associated with firm performance. By focusing on observed relationships, it aims to contribute to a more grounded understanding of whether ESG engagement is associated with financial outcomes.