IMPACT OF ESG PRACTICES ON FINANCIAL PERFORMANCE, INVESTMENT DECISIONS, AND SUSTAINABILITY OF MSMES: EVIDENCE FROM BANGALORE CITY

Abstract

The study is motivated by the desire to determine the role of Environmental, Socialands Governance (ESG) practices in terms of their influences on the financial performance, investment decisions and sustainability of Micro, Small and Medium Enterprises (MSMEs) within the Bangalore City. As the stakeholders continue to put more focus on conducting sustainable businesses, the use of ESG has become a strategic tool that can shape the business performance as well as long-term sustainability. The study is based on a mixed-methods methodology, whereby it uses quantitative evidence generated through the structured survey of the MSME owners and managers combined with the qualitative data provided in semi-structured interviews. The executed analysis falls in the category of statistical analysis (which includes regression and correlation methods) to evaluate the correlation between the levels of ESG implementation and the key performance indicators of a company profitability, the possibility of investment, and operational resilience. The findings show that MSMEs that include ESG practices in their business actively are characterized by better financial performance, enhanced investor assurance, and enhanced capacity to adapt to environmental and market problems. Nevertheless, the factors present barriers to a broader implementation, including insufficiency of resources and ESG-related expertise and unclarity of regulations. It can be concluded that capacity-building interventions, strategically orientated policy, and stakeholder cooperation are necessary to promote ESG adaptation in MSMEs through the development of urban economic sustainability.