The Impact of the ESG Factors on Pharmaceutical & Care Companies’ Profitability and Market Value

In the modern world, under pressure from society, environmental, social and corporate governance (ESG) issues become increasingly significant for businesses - 73% of investors expect businesses to behave more ethically (Vontobel Study, 2019). Influenced by the trend, more and more companies today integrate sustainability in their corporate strategies. According to the UN, sustainable development is “development that meets the needs of the present without compromising the ability of future generations to meet their own needs” (Our Common Future (Brundtland Report), 1987). In other words, sustainability of business refers to company performance without negative impact on environment and society. Constantly evolving corporate sector environment drives expansion of considering factors affecting financial stability of the company. That’s why sustainability trends continue to be reflected in companies’ financials. Sustainability Accounting Standards Board determines standards regulating disclosure of “financially material sustainability information” by companies. SASB defines financially material issues as those, that “are reasonably likely to impact the financial condition or operating performance of a company”. The Financial Stability Board set up the Task Force on Climate-Related Financial Disclosures to develop efficient ‘‘climate-related financial disclosures’’ enabling investors to better understand ‘‘financial system’s exposures to climate-related risks’’. Still, researchers continue debating whether sustainability initiatives, besides confronting global challenges, can drive financial performance, as well as business overall.