Sustainability meets risk management: ESG disclosure and financial performance in Kazakhstan

The integration of Environmental, Social, and Governance (ESG) factors into corporate strategies has transitioned from a voluntary practice to an increasingly obligatory requirement in response to evolving global regulations and stakeholder expectations. Beyond compliance, ESG considerations have become integral to Enterprise Risk Management (ERM), enabling organizations to identify, assess, and mitigate complex risks tied to sustainability challenges. These include environmental vulnerabilities, social accountability, and governance inefficiencies, which increasingly influence long-term financial stability and investor confidence. This study examines the relationship between ESG disclosure and financial performance in 50 publicly listed companies in Kazakhstan over the 2010–2019 period. Employing panel regression models and traditional financial analysis, the research evaluates the impact of ESG scores – and their environmental, social, and governance components – on return on assets (ROA), return on equity (ROE), and return on capital (ROC). Control variables such as firm size, asset turnover, leverage ratio, and asset growth are incorporated to ensure robustness. The findings reveal a significant positive relationship between ESG disclosure, particularly its environmental component, and profitability, with the materials sector exhibiting the strongest correlation. These results underscore the dual role of ESG disclosure as a strategic driver of financial performance and an essential component of ERM, offering actionable insights for policymakers, investors, and corporate leaders striving to align sustainability practices with risk management and financial goals.