Is there a relationship between environmental, social, and corporate governance indicators and profitability and return of companies in the electric power sector?

Abstract

This research aims to analyze the relationship between profitability and return indicators, with Environmental, Social, and Corporate Governance (ESG) and indexes from the Added Value Statement (AVS) in electric power companies on the B3 ISE Portfolio (2018 to 2020), using the legitimacy and stakeholder theory approach. Quantitative, descriptive, and documentary research techniques were used for this purpose, and the data were treated using descriptive statistics and Spearman's correlation test. All eight companies showed positive profitability and return averages, and the total added value to distribute (VA) equals 49.95% of total revenues. The wealth generated is distributed mostly to the Government (GOV), and third-party capital return (RCT). The total average of the ESG index suggests satisfactory performance and an above-average degree of transparency, with an emphasis on the environmental component, which means excellent performance and a high degree of transparency. In 2020, all the profitability and return indicators were higher than in previous years, while the amounts destined for government and payroll were the lowest. On the other hand, the amount allocated to return on equity (ROE) showed positive and significant relationships with all the profitability and return indicators, while the VA showed only with the profitability indicators. The VA has a positive relationship only with the profitability indexes. The ESG index and its environmental and social components showed positive and significant associations with return on assets, suggesting that the Corporate Social Responsibility of those companies generated wealth for their total assets.