The convergence of Environment (E), Social (S), and Governance (G) has attained global significance, becoming the primary benchmark for measuring corporate performance. There is an established perception within the realms of academia and the finance industry that excellent ESG performance will lead to greater profitability and lower risk levels. Nonetheless, such a consensus is founded on the premise of linear assumptions and largely based on information from advanced economies that do not address the multifaceted considerations involved in resource allocation in emerging countries, such as India.

Linear assumptions and mean estimations have dominated the current body of literature, neglecting any thresholds or distributions in emerging Indian markets. Still, empirical support for the assertions is highly fragmented. There remains a substantial gap in the literature review in the consideration of any possible nonlinear relationship between ESG and corporate performance, where significant levels of investment in ESG are required to generate benefits. Additionally, conventional studies overlook the asymmetrical consequences. For example, there are different implications for ESG investments among companies making high profits and those underperform.

In this study, an attempt is made to study the relationship between the performance of firms and their ESG practices using this model for the Nifty 500 index. This study uses balanced panel data of 404 firms from the Nifty 500 index covering a nine-year period (2016-2024). This study uses Panel Data Models and Quantile Regression Techniques to identify the real determinants of ROA and Risk. The primary objective of the study is to genuinely determine whether ESG serves as a driver of financial value or merely a non-value-adding compliance expenditure in emerging markets where resources are limited.

By explicitly testing for nonlinearity and asymmetrical distributions, this study aims to make a definitive contribution to the literature. This study tries to contribute to ongoing debates in stakeholder theory and neoclassical economics. The empirical findings suggest that, for the sampled firm and time frame, ESG may operate more as a necessary compliance metric rather than as a direct driver of financial performance, even after controlling for core financial fundamentals such as size and leverage.