ESG Performance and Cost of Capital an Empirical Study of Listed Indian Companies

Abstract

This study, titled "ESG Performance and Cost of Capital: An Empirical Study of Listed Indian Companies," evaluates environmental, social, and governance (ESG) pillar weightings, Weighted Average Cost of Capital (WACC) compression, green bond market expansion, cost of debt reduction, and financial feasibility of enterprise ESG disclosure platforms across NSE/BSE listed firms in India. Listed corporations operate in evolving capital markets, where Environmental scoring represents 40%, Governance represents 35%, and Social represents 25% of overall ESG rating assessments. A five-year project lifecycle (2021-2025) of an automated ESG disclosure and sustainable finance platform is evaluated using capital budgeting parameters: Net Present Value (NPV), Internal Rate of Return (IRR), Payback Period (PBP), and Benefit-Cost Ratio (BCR). Quantitative analysis reveals that achieving ESG Leader status compresses corporate WACC to 5.8% compared to 11.5% under Low ESG tier firms. Scaling green bond issuances to ₹22,000 Crores delivers a credit rating spread discount of 135 basis points, expanding corporate ESG score index to 92.8 and compressing the Cost of Debt to 4.8% by 2025. The financial model yields a positive NPV of 284.5 Crores and an IRR of 38.6%, far exceeding the 10% discount hurdle rate. The study concludes that investing in ESG disclosure and sustainability management platforms is highly viable, lowering corporate cost of capital and boosting enterprise value. Keywords: ESG Performance, Cost of Capital, WACC Compression, Listed Indian Companies, Green Bonds, Cost of Debt, Capital Budgeting, Financial Feasibility.