The Impact of ESG Practices on Corporate Financial Performance: Evidence from Tesla

Abstract

This paper aims to explore the impact of ESG practices on Tesla's financial performance, clarify the relationship between the two and the influencing path, and provide references for ESG practices in the automotive industry. The research uses the literature research method and case analysis method. It sorts out ESG-related theories and literature, and combines Tesla's Impact Reports from 2020 to 2024 and third-party data to analyze its ESG performance from the dimensions of environment, society, and governance. It also evaluates the impact on financial performance in combination with financial indicators. The study finds that Tesla's ESG disclosures are polarized. The environmental data is detailed, but the disclosure of negative information on society and governance is insufficient. ESG practices have broadened its financing channels and optimized financing costs. The impact on financial performance is complex. In the short term, it increases costs and reduces profitability, while in the long term, through technological innovation, brand reputation improvement, etc., it promotes the improvement of profitability, operating ability, solvency, and development ability. Based on this, ESG optimization strategies are proposed from the perspectives of enterprises, the market, and the government. At the same time, the deficiencies of this study, such as the lack of quantitative analysis, are pointed out to provide directions for follow-up research.