DOES ESG INVESTMENT IMPACT THE FINANCIAL SUSTAINABILITY OF NIGERIAN ENERGY COMPANIES: A PANEL REGRESSION APPROACH?

Abstract

The destruction of around 5% to 10% of Nigerian mangrove ecosystems and the disappearance of approximately 7,400 square kilometres of rainforest have shifted managerial priorities in Nigeria's energy sector from purely financial gain to increased social responsibility. The rising concerns regarding climate change, environmental risks, social well-being, and sustainability have propelled ESG investment to the forefront of corporate sustainability considerations. The study delves into the influence of ESG investment on the financial sustainability of listed industry players in Nigeria's oil and gas industry. By utilizing quantitative data from sustainability and corporate annual reports of listed firms on the Nigeria Exchange Group from 2013 to 2023, a fixed pooled panel regression model was conducted to statistically test the three hypotheses anchored on the ESG nexus on financial sustainability. The findings indicate that the relationship between environmental investments, measured by environmental emissions, and return on assets (ROA) for the examined listed entities is insignificant. However, the research establishes a notable correlation between social investing practices, quantified by workforce size, and ROA, displaying a positive coefficient. Moreover, the study does not confirm a substantial impact of governance investing practices, measured by board size, on the ROA of the scrutinized corporations. The research acknowledged the impact of ESG on the financial sustainability of Nigeria’s energy sector. The research recommendations include integrating ESG factors into investment strategies, enhancing disclosure and transparency, improving risk management and resilience measures, and collaborating with policymakers.

Keywords

• ESG investment
• financial sustainability
• Nigerian energy companies
• panel regression approach