Gulf ESG efforts fail to link profit with sustainability, study shows

Extensive 14-year dataset finds no robust connection between ESG and financial performance in the region, in contrast with Europe, North America and Asia

The Gulf’s largest study on ESG and profitability has concluded that sustainability does not pay, with results indicating state-driven policy rather than shareholder value is behind adoption.

Researchers from Nova School of Business and Economics (Nova SBE) and ESMT Berlin analysed 14 years of data from publicly listed companies in Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. The work was carried out by Professors Rodrigo Tavares (Nova SBE) and Catalina Stefanescu-Cuntze (ESMT), alongside Catarina Sá, Teaching Assistant at Nova SBE.

The dataset covered more than 4,400 monthly ESG score observations and nearly 9,000 stock return observations between 2009 and 2023, making it the most extensive academic study of corporate sustainability in the Gulf to date.

While previous research has often asked whether sustainability improves profitability, the study also explored the reverse: whether profitable firms reinvest in ESG. In both directions, the findings revealed weak, inconsistent and statistically non-robust relationships.

Evidence of a two-way causal link between ESG and financial performance was found in only two out of 54 firms analysed, representing around 3.7% of the sample. A further ten firms (18.5%) showed a one-way link, either from ESG to financial performance or vice versa.

“In the Gulf, ESG is driven more by government policy than profit. Our research reveals that, contrary to global trends, ESG performance is a political lever, not a financial one. It has not yet translated into market force, like we see in the rest of the world,” Professor Tavares said.

The paper, ESG-financial performance in the Gulf region: a bidirectional examination, was published in Sustainable Communities in September 2025.

Professor Stefanescu-Cuntze added: “This challenges the prevailing narrative that sustainability drives market value and suggests that, in the Gulf, ESG is primarily a tool for state-led economic transformation, not shareholder returns. We should reflect critically on the universality of the argument that ‘sustainability pays off’, from a financial perspective.”

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