ESG Disclosure and Firm Performance: A Comparative Analysis of Nordic and European Companies

Environmental, Social, and Governance (ESG) disclosure has emerged as a central issue for investors, managers, and policymakers, yet evidence on its financial consequences remains mixed and context dependent. This study investigates how ESG disclosure influences firm performance in Europe, with a comparative focus on Nordic versus non-Nordic firms. Using a panel of approximately 24,500 firm-year observations from 2015 to 2024, ESG scores and their environmental, social, and governance pillars are examined against Return on Assets (ROA), Return on Equity (ROE), and Weighted Average Cost of Capital (WACC). Panel regression models are estimated with fixed- and random-effects specifications determined by Hausman tests, controlling for firm size, leverage, and market risk (beta). The findings reveal that, in Nordic firms, higher ESG performance is consistently associated with lower WACC, but shows no significant effect on profitability measures, suggesting that markets in ESG-mature contexts primarily reward sustainability through cheaper financing. In contrast, among non-Nordic European firms, overall ESG scores are negatively related to ROA and marginally to ROE, while only governance reduces WACC, highlighting potential short-term trade-offs of ESG investments in less mature institutional environments. These results advance the literature by demonstrating that the ESG–financial performance link is shaped by regional institutional maturity, and they underscore the importance of governance quality for financing efficiency. The study offers implications for managers considering sustainability strategies, investors evaluating firm risk profiles, and policymakers designing disclosure regulations to balance long-term value creation with near-term performance pressures.