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The topic around sustainability is something that has emerged as a vital pillar for companies all around the world. In the sense of measuring sustainability performance, ESG has become a worldwide used and accepted measurement tool for sustainability performance. The ESG score evaluates the company within three main pillars, Environmental, Social, and Governance. This Study will dissect the ESG into the three main pillars as this gives the possibility to analyze the impact of the three different pillars individually and not only the overall score.

The passenger airline industry has had some issues over the years, and they are still existent. Environmental issues such as high greenhouse gas emissions and social issues such as poor working conditions. Therefore, this thesis will focus on the passenger airline industry and investigate how the individual ESG pillars affect financial performance. In this thesis financial performance was divided into two parts, market-based which was measured through Tobin’s Q and accounting-based which was measured through Return On Assets.

In order to fulfill the purpose of this study, which were to investigate whether there is a connection between a listed airline’s separate environmental-, social-, and governance scores and its financial performance, six different regression analyses were made. The regressions were made on data from 50 listed passenger airlines during the time-period of 2016-2022. All six different regression analyses failed to find a significant relation between the individual ESG pillar and financial performance. This does not necessarily mean that there is no connection between the ESG pillars and financial performance, but in this thesis with the data we collected there was not enough evidence for a statistically significant connection. Because of the non-significant result, we could not provide additional evidence towards which of the theories, stakeholder theory or shareholder theory, being best suited for this industry.