What is Retained Earnings

There seems to be a growing demand for companies to disclose information about natural, human, and financial resources used by them and its implications on environment and society. This gives rise to ESG metrics and related corporate reporting in their annual reports. The study aims to examine the relationship between internal and external sources of funds and the environmental, social, and governance score. The study is based on a sample of Nifty 50 companies listed on the National Stock Exchange of India, consisting of 245 observations. The study period was 5 years starting from 2017 to 2021. The variables studied were debt-equity ratio; retained earnings; and environmental, social, and corporate governance performance (ESG score). The study provides evidence of a negative relationship between debt-equity ratio and ESG score. The practical implication of the study is taken from the findings that it is high time for the firms to pay more attention towards improving their ESG score by taking up more sustainable projects through compliance of regulations in their business decisions.