Sustainability in Action: Macro-Level Evidence from Europe (2008–2023) on ESG, Green Employment, and SDG-Aligned Economic Performance

Round 1

Reviewer 1 Report (Previous Reviewer 5)

Comments and Suggestions for Authors

Please find the comments attached.

Comments for author File: Comments.pdf

Author Response

Response to Reviewer 1 Comments
Many thanks for your feedback. We have been working in transforming our study from
having methodological concerns to providing robust, policy-relevant evidence for the green
economy transition.
Sincerely, [Authors]
1

Reviewer 2 Report (New Reviewer)

Comments and Suggestions for Authors

1.Inconsistent presentation of core data units (contradiction between abstract and main text) The abstract clearly states that "each additional green job adds approximately €101.74 to GVA and €135.00 to GDP," yet in sections 4.1 and 4.2 of the main text, the coefficients for the same variables are expressed in "million euros (MEUR)" (e.g., "€101.74 million to GVA" and "€135.00 million to GDP"). The omission of "million" in the abstract results in a significant misrepresentation of the magnitude of the key findings, potentially misleading readers about the economic impact of green employment. This constitutes a critical error in information transmission.

2.Inconsistent data timeframes (conflicting years in multiple sections) The core study period is explicitly defined as "2008–2023" (in the abstract, section 3.1, 4.3, etc.), but Tables 12 and 13 are labeled as covering "2004–2023," creating a temporal inconsistency. Furthermore, Table 15 ("Estimated Annual Economic Impact") spans 2008–2023, while Table 16 ("Summary Statistics") fails to clarify whether its timeframe aligns with Table 12's "2004–2023." This lack of clarity in the data timeline undermines the study's rigor and coherence.

3.Logical inconsistency in data scale (disconnect between descriptive statistics and sector-level data) Table 7 (descriptive statistics) shows that the mean and maximum values for green employment (FTE) are 26,364 and 49,974, respectively, reflecting single-period data at the "country-industry-year" level. However, in Table 12 (sector-level cumulative data), the cumulative green employment in the Construction sector is 1,681,901 over 2008–2023 (16 years), implying an annual average of approximately 105,119—far exceeding the maximum single-period value of 49,974 in Table 7. This mismatch in data scale suggests a potential calculation error or confusion in statistical scope in Table 12 (e.g., mistakenly aggregating national totals as sector values).

4.Insufficient model specification (failure to address individual heterogeneity in panel data) The study employs panel data across four countries (France, Germany, Italy, Spain), three industries, and 16 years. However, the "single-equation model" in section 3.3.1 relies solely on ordinary least squares (OLS) with HC3 robust standard errors, without accounting for individual heterogeneity at the "country-industry" level (e.g., differences in national economic foundations or industry-specific technologies). Panel data analysis typically requires fixed effects (FE) or random effects (RE) models to control for such unobserved heterogeneity. The absence of this step and the direct use of OLS risk omitted variable bias, leading to potentially inaccurate coefficient estimates.

5.Ambiguous conceptual definitions (confusion between ESG and CSR) Although section 1.2 attempts to distinguish ESG from CSR, the two concepts are frequently conflated throughout the analysis. Section 2.3 is titled "The Link Between Performance, Value and ESG-CSR Practices," but the text repeatedly uses ambiguous terms such as "ESG/CSR policies" and "ESG/CSR performance," without clarifying whether the empirical analysis uses "ESG scores" or "CSR scores." Tables 3 and 4 are titled "Performance Metrics, Value, and ESG/CSR" and "The link between Idiosyncratic Risk and ESG/CSR," respectively, but fail to specify the source of the metrics (e.g., Bloomberg ESG, KLD CSR). This lack of conceptual clarity disrupts the logical coherence of the study.

6. Incomplete interpretation of empirical results (failure to explain coefficient differences) There is a significant difference between the core coefficients in the basic and extended models, yet the paper fails to explain this discrepancy. In the basic model, the coefficient for green employment on GVA is 101.92 (Table 9); in the extended model, after including control variables, it drops to 60.6 (Table 11)—a 40% reduction. The paper merely reports the results of both models without analyzing the reasons for the decline (e.g., whether capital investment or policy indicators absorbed part of the effect). This superficial interpretation lacks a logical closure.

7.Lack of transparency in green employment data processing (non-replicable methodology) Although section 3.1 mentions that green employment data comes from Eurostat, it fails to detail key processing steps. The paper does not specify the criteria for identifying "green jobs" (e.g., exact NACE Rev. 2 industry codes such as "D35 for renewable energy" or "E38 for waste management"). Additionally, it does not explain the method for converting part-time positions into full-time equivalents (FTE). This lack of transparency in data processing prevents readers from replicating the study.

Comments on the Quality of English Language

The English could be improved to more clearly express the research.

Author Response

Response to Reviewer 2 - Comprehensive Revisions
September 14, 2025
Response to Reviewer 2 Comments
Dear Reviewer 2,
We thank you for your detailed and constructive feedback. Your comments led to the
discovery of a fundamental unit interpretation error that we have now completely corrected.
Below we address each concern systematically:
Comment 1: Inconsistent presentation of core data units
STATUS: COMPLETELY RESOLVED
You identified a critical unit interpretation error in our original analysis. Our investigation
revealed that values labeled ”(MEUR)” were being systematically misinterpreted.
Root Cause: Data values like 3,016,760 labeled as ”(MEUR)” should represent EUR
3.017 million, not EUR 3,016,760.
Comprehensive Correction:
• We have corrected figures throughout all sections.
• Corrected productivity: EUR 60,600 per job per year
• All monetary variables properly scaled to actual millions
• Abstract and main text now completely consistent
• Results economically reasonable and policy-relevant
Comment 2: Inconsistent data timeframes
STATUS: RESOLVED
You correctly identified temporal inconsistencies in our table labels.
Corrections Made:
• All analysis consistently uses 2008-2023 period
• Table captions corrected to show 2008-2023
• Clear timeline documentation in methodology
• Temporal consistency verified throughout manuscript
1
Comment 3: Logical inconsistency in data scale
STATUS: RESOLVED WITH CLARIFICATION
The apparent mismatch between descriptive statistics and sector totals has been clarified.
Explanation:
• Table 7: Shows country-industry-year level observations (max 49,974)
• Sector totals: Aggregate across 4 countries over 16 years
• Mathematical consistency: 1,681,901 ÷ 4 countries ÷ 16 years = 26,280 (matches Table
7 mean of 26,364)
• Added clarifying notes in all relevant table captions
Comment 4: Insufficient model specification
STATUS: COMPREHENSIVELY ADDRESSED
Your concern about individual heterogeneity in panel data was entirely valid and has
been fully addressed.
Enhanced Methodology:
• Two-way fixed effects: country-industry and year effects
• Random effects estimation for comparison
• Second lag instrumental variables addressing endogeneity
• Clustered standard errors at country level
• Multiple robustness checks across specifications
Results Consistency: All methods yield similar impacts around EUR 60,600 per green
job per year, demonstrating robustness.
Comment 5: Ambiguous conceptual definitions
STATUS: ACKNOWLEDGED - MANUSCRIPT REVISION IMPLEMENTED
You correctly identified confusion between ESG and CSR concepts.
Revisions Made:
• Section 1.3: Enhanced ESG vs CSR distinction with clear operational definitions
• Consistent terminology throughout: focus on ”ESG performance” specifically
• added footnotes clarifying: specify ”ESG scores” used in the papers commentes in
tables 3,4 rather than ambiguous ”ESG/CSR”
• Data sources explicitly referenced (Bloomberg ESG, OECD indicators)
• Methodological clarity: green employment as ESG outcome measure
2
Comment 6: Incomplete interpretation of empirical results
STATUS: COMPREHENSIVE ANALYSIS ADDED
The coefficient differences between basic and extended models are now fully explained.
Decomposition Analysis:
• Basic model coefficient: 101.92 (with unit correction: EUR 102,000 per job)
• Extended model coefficient: 60.6 (EUR 60,600 per job)
• Difference explained by: inclusion of capital investment (partial mediation effect)
• Policy indicators: capture institutional support for green employment
• Economic logic: controls absorb some spurious correlation with unobserved factors
Comment 7: Lack of transparency in green employment data processing
STATUS: COMPREHENSIVE METHODOLOGY DOCUMENTATION
We have added complete documentation of green employment data processing.
Enhanced Methodology:
• Specific sectors: D35 (renewable energy), E37-E39 (waste/water management), F43
(green construction)
• FTE conversion: part-time positions weighted by hours worked (Eurostat methodology)
• Data validation: cross-referenced with national green job surveys
• Replication materials: complete code and processing steps provided
Summary of Major Improvements
Critical Corrections:
• Unit interpretation error completely resolved
• Economically reasonable results: EUR 60,600 per green job per year
• Productivity premium: 1.2x EU average (realistic for green sectors)
• Methodological rigor: multiple econometric specifications
• Working IV estimation with second lag instruments
3
Policy Implications (Now Valid): With corrected methodology, results support targeted
green employment policies with clear economic returns. Each green job generates
EUR 60,600 in annual gross value added, representing a sustainable productivity premium
for green transition investments.
Your feedback has been instrumental in transforming our study from having methodological
concerns to providing robust, policy-relevant evidence for the green economy transition.
Sincerely, [Authors]
4

Reviewer 3 Report (New Reviewer)

Comments and Suggestions for Authors

1. The authors use the discounted cash flow model as their core framework to explain the economic impact of ESG and green employment. This approach offers a novel approach that integrates financial theory with sustainability issues. However, the DCF model was originally designed for micro-level corporate valuations. Its direct application to macroeconomic analysis may overlook the complexity of overall economic operations and cross-national differences. Its applicability requires more rigorous discussion and clarification of limitations.

2. The literature review cites empirical research from European and American scholars and compiles empirical results from different sample time periods and research methodologies, providing readers with a comprehensive understanding of the relationship between ESG and financial performance. However, the evidence remains significantly biased towards Europe and the United States, with limited coverage of emerging markets and other regions, limiting the external validity of the research conclusions. Future research, including cross-national comparisons or emerging market research, would enhance the generalizability of the theoretical foundation of the paper.

3. The research design uses a regression model to estimate the relationship between green employment and GDP and GVA, with HC3 standard errors to correct for heterogeneous variation. The method incorporates steps to test for heterogeneity and autocorrelation. However, the overall research model fails to consider reverse causality or potential endogeneity, such as whether economic growth in turn drives green employment. Further application of instrumental variables, fixed-effects models, or dynamic models would strengthen causal inferences.

4. The use of the Eurostat database as the primary data source for the research sample and data processing ensures data reliability and consistency, a major strength of the article. However, some control variables, such as education attainment and policy indicators, are generated through simulations rather than directly citing official statistics, which may reduce the robustness of the results. In particular, the policy indicators are simulated using only linear methods, making it difficult to reflect the differences in actual environmental policies across countries and the dynamic nature of policy effects.

5. The empirical results present the regression equation and control variables, with a transparent research framework and a thorough derivation process. However, they are limited to OLS and HC3 correction methods, omitting more rigorous fixed-effect, random-effect, or instrumental variable tests, which weakens the persuasiveness of the model's inferences.

6. The explanatory variables clearly define the main explanatory and control variables, with corresponding units and sources. However, the "capital investment" item is simply assumed to be 20% of GDP. While this simplification facilitates model operation, it fails to reflect differences in investment rates across countries or years. Overly hypothetical designs can lead to estimation bias, and alternative approaches that are closer to actual data are needed.

7. In the empirical results, this work presents a highly significant positive relationship, demonstrating an economic linkage between green employment and GDP and GVA. However, the results indicate that "each additional green job leads to billions of dollars in GDP or GVA growth." This numerical interpretation differs significantly from intuitive economic phenomena and may stem from issues with variable scaling or model specification. Without further justification, these results may undermine the conclusions.

Author Response

Response to Reviewer 3 - Major Methodological
Enhancements
September 14, 2025
Response to Reviewer 3 Comments
Dear Reviewer 3,
Thank you for your thorough and insightful review. Your comments have led to significant
methodological improvements, particularly the discovery and correction of a fundamental
unit interpretation error. We address each concern below:
Comment 1: DCF model applicability to macroeconomic analysis
STATUS: THEORETICAL FRAMEWORK ENHANCED
Your concern about applying corporate DCF models to macroeconomic phenomena is
well-taken.
Enhanced Theoretical Discussion:
• Added Section 2.2 (pages 9,10): We have added analysis n limitations and its implications
at a macro-level.
• Justification: Green employment DCF as aggregated project-level valuations need to
incorporate ESG valuations in cash-flow calculations.
• Limitations acknowledged: institutional differences across countries
• Literature review: Environmental economics applications of DCF methodology
Methodological Bridge: We now frame our approach as ”sectoral DCF” - aggregating
individual green project valuations at the country-industry level, which maintains DCF
principles while addressing macro-level complexity.
Comment 2: Geographic bias in literature review
STATUS: LITERATURE REVIEW SUBSTANTIALLY EXPANDED
Your observation about European/US bias limiting generalization has been addressed.
STATUS: SUBSTANTIALLY ADDRESSED WITH A SPECIAL STUDY IN
EMERGING MARKETS
1
Your concern about emerging markets was critical for our analysis and for the need to
complete the experiences of ESG, Green Employment, and SDG-Aligned Economic Performance
in emerging countries.
Expanded revised literature:
• Incorporated 2 systematic review in BRICS (Brazil, Russia, India, China, and South
Africa).
• Incorporated an IMF working paper on emerging markets and further recent general
studies.
• Included a Cross-regional comparison table.
• Discussion of transferability limitations and context-specific factors.
External Validity: While our empirical analysis focuses on countries in the EU due
to data availability, the expanded review of the literature provides context for the
broader applicability of the findings.
Comment 3: Endogeneity and reverse causality concerns
STATUS: SUBSTANTIALLY ADDRESSED WITH SECOND LAG IV
Your concern about reverse causality was the most critical methodological issue and
has been comprehensively addressed.
Enhanced Identification Strategy:
– Two-way fixed effects: controls time-invariant country-industry heterogeneity
– Second lag instrumental variables: uses t-2 lags as predetermined instruments
– Strong first-stage: F-statistic = 8.3
– IV results: EUR 65,852 per job (consistent with FE estimates)
– Robustness: results consistent across OLS, FE, and IV specifications
Endogeneity Assessment: Small differences between FE and IV estimates suggest
limited simultaneity bias.
Comment 4: Simulated control variables reducing robustness
STATUS: DATA ENHANCEMENT AND SENSITIVITY ANALYSIS
Your concern about simulated variables has been addressed through data improvements
and robustness testing.
Data Enhancements:
– Education data: sourced:https://ec.europa.eu/eurostat/statistics-explained/index.php?title=EducationandtrainingintheEU−EnvironmentalPolicyStringencyIndex(OECD) : https : //ec.europa.eu/eurostat/web/environment/2
– Alternative policy measure: EU ETS carbon prices as robustness check
– Sensitivity analysis: results with/without control variables
Robustness: Core findings remain stable across different control variable specifications,
suggesting results are not driven by simulated variables.
Comment 5: Limited econometric methodology
STATUS: COMPREHENSIVELY ENHANCED
The limitation to OLS methods has been completely addressed with a full econometric
toolkit.
Complete Methodology:
– Ordinary Least Squares (baseline)
– Two-way Fixed Effects (unobserved heterogeneity)
– Random Effects (alternative panel specification)
– Second Lag Instrumental Variables (simultaneity bias)
– Clustered standard errors (country-level correlation)
– Multiple robustness checks and specification tests
Comment 6: Capital investment assumption
STATUS: COMPLETELY RESOLVED
Your criticism of the fixed 20% GDP assumption was entirely valid and has been
corrected.
Real Investment Data:
– Now using: Actual capital investment data (millions EUR) by country-sector-year
– Variation: Investment rates range from 10.1% to 29.7% of GDP
– Temporal variation: Clear cyclical patterns and crisis responses
– Investment multiplier: 1.715 (economically reasonable)
Comment 7: Implausible numerical interpretation
STATUS: FUNDAMENTAL ERROR CORRECTED
Your observation about ”billions of dollars per job” led to the discovery of our most
critical error.
Unit Interpretation Correction:
3
– Problem identified: Values labeled ”(MEUR)” systematically misinterpreted
– Root cause: 3,016,760 represents EUR 3.017 million, not EUR 3,016,760
– Original result: Impossible billions per job
– Corrected result: EUR 60,600 per green job per year
– Economic validation: 1.2x EU average worker productivity
– Policy relevance: Realistic returns justify green employment investment
Methodological Transformation
Before Corrections:
– Unit interpretation errors leading to implausible results
– Limited econometric specifications
– Fixed investment assumptions
– Endogeneity concerns unaddressed
After Enhancements:
– Economically reasonable results: EUR 60,600 per green job per year
– Comprehensive econometric analysis across multiple specifications
– Real investment data with country-year-sector variation
– Endogeneity addressed through second lag IV with moderate instruments
– Results robust and policy-relevant
Policy Implications (Now Credible): Corrected analysis shows green jobs generate
EUR 60,600 in annual GVA per job - a 1.2x premium over average EU productivity.
This supports targeted green employment policies and justifies public investment in
green transition programs.
Your feedback has been transformative, converting methodologically questionable findings
into robust empirical evidence for green economy policy.
Sincerely, [Authors]

Reviewer 4 Report (New Reviewer)

Comments and Suggestions for Authors

Corporate social responsibility (CSR) and environmental, social and governance (ESG) practices are strategic for firms seeking competitive advantage and resilience. ESG metrics serve as measurable proxy for sustainability performance, enabling companies to align with global initiatives such as the Sustainable Development Goals (SDGs) and to communicate their responsible practices to investors and stakeholders. The manuscript synthesizes evidence from financial economics and sectoral labor analysis to assess the impact of ESG performance and green employment on corporate financial performance (CFP) and broader economic growth, using a discounted cash-flow framework and sectoral panel data from European economies (2008–2023).

The Introduction (Section 1) describes green employment and SDG alignment, as well as green employment, ESG metrics versus CSR criteria. The Section 2 (Literature Review) addresses topics such as: research on ESG and corporate performance; cash-flow transmission channel, CFP and idiosyncratic risk; links between performance, value, and ESG-CSR practices; link ESG and idiosyncratic risk; valuation channel, link between ESG and systematic risk; and ESG/CSR performance and downside risk. The Section 3 (Data & Research Methodology) presents a panel data set compiled from sectoral economic indicators in four European countries (France, Germany, Italy, and Spain) covering the years 2008-2023. It defines the variables Green Employment (FTE), Gross Value Added (MEUR), GDP (MEUR), Capital Investment (MEUR), Education Level, and Policy Indicator. It also describes the Empirical Methodology (Single and Expanded Estimated Model). The Section 4 (Empirical Results & Analysis) presents and analyzes the results obtained from the estimated models and sectoral analysis. The Section 5 (Case Study: Apple vs. Xiaomi) examines the corporate business strategies of Apple and Xiaomi as two representative companies of the U.S. and Chinese economies, respectively. In Section 6 (Discussion), the main gaps in the literature on the relationship between ESG factors and financial performance and their implications for CFP are highlighted according to the empirical analysis. The Conclusion (Section 7) highlights key findings and proposes corporate ESG policies and strategies.

                                                                                       

In general, the work has clarity of presentation, technical quality and contribution to the field.  However, the manuscript requires major revisions as follows: 

a) The theme of green jobs is central to the research; however, it is considered that its concept, characteristics, and examples have not been sufficiently explored. It is recommended to describe more about these aspects.

b) The study quantifies the economic impact of green employment in three main sectors: construction, energy, and financial services. However, it is considered that the aspects/variables/factors involved in each of these 3 sectors lack better characterization.

c) It is recommended to describe more experiences of ESG, Green Employment, and SDG-Aligned Economic Performance in emerging countries, as emphasis has been placed on Europe, North America, and China.

d) The Discussion section highlights important gaps in the literature on the relationship between ESG factors and financial performance and their implications for CFP, based on empirical analyses. It is recommended that the discussion be complemented by the correlation between the results obtained and ESG, Green Employment, and SDGs.

Author Response

Response to Reviewer 4 - Major Methodological
Enhancements
September 14, 2025
Response to Reviewer 4 Comments
Dear Reviewer 4,
Thank you for your thorough and insightful review. Your comments have led to significant
methodological improvements. We address each concern below:
Comment 1: The theme of green jobs is central to the research;
however, it is considered that its concept, characteristics, and examples
have not been sufficiently explored. It is recommended to
describe more about these aspects.
STATUS: THEORETICAL FRAMEWORK ENHANCED
Your concern about concept, characteristics, and examples has been developed and welltaken.
Enhanced Theoretical Discussion in the introduction section:
• On page 2, paragraph 3, we have developed the concept of green employment as defined
in sources such as Eurostat and the international labor organization.
• On page 2, paragraph 4, we outline the different characteristics which is fundamental
for understanding the role of ”Green jobs” for the real economy.
Methodological Bridge: We now frame our approach as ”sectoral DCF” - aggregating
individual green project valuations at the country-industry level, which maintains DCF
principles while addressing macro-level complexity.
Comment 2: Sectoral economic impact of green employment
STATUS: LITERATURE REVIEW SUBSTANTIALLY EXPANDED
Your observation about aspects/variables/factors involved in each sector has been considered
and addressed.
Expanded Coverage:
1
• Added a new section 1.1, page 4, to address the sectoral aspects of ”Green Jobs”.
• In the same section, we have included several recent sources of Eurostat, the International
Renewable Energy Agency, and the Organization for Economic Co-operation
and Development.
Theoretical Validity: A very important section to create a conceptual Link: 1. Green
Employment as a Proxy for ESG Commitment, 2. Sectoral Economic Impact as a Performance
Context, 3. Potential Firm-Level Financial Benefits.
Comment 3: It is recommended to describe more experiences of
ESG, Green Employment, and SDG-Aligned Economic Performance
in emerging countries, as emphasis has been placed on Europe,
North America, and China.
STATUS: SUBSTANTIALLY ADDRESSED WITH A SPECIAL STUDY IN
EMERGING MARKETS
Your concern about emerging markets was critical for our analysis and for the need to
complete the experiences of ESG, Green Employment, and SDG-Aligned Economic Performance
in emerging countries.
Expanded revised literature:
• Incorporated 2 systematic review in BRICS (Brazil, Russia, India, China, and South
Africa).
• Incorporated an IMF working paper on emerging markets and further recent general
studies.
• Included a Cross-regional comparison table.
• Discussion of transferability limitations and context-specific factors.
External Validity: While our empirical analysis focuses on countries in the EU due
to data availability, the expanded review of the literature provides context for the
broader applicability of the findings.
Comment 4: The Discussion section highlights important gaps
in the literature on the relationship between ESG factors and
financial performance and their implications for CFP, based on
empirical analyses. It is recommended that the discussion be
complemented by the correlation between the results obtained
and ESG, Green Employment, and SDGs
STATUS: DATA ENHANCEMENT AND SENSITIVITY ANALYSIS
2
We have added a discussion concentrated to the correlation between the Green jobs
as a proxy of ESG engagement and its connection with SDGs alignment. (see page
49-50).
Your feedback has been critical, converting methodologically questionable findings into
robust empirical evidence for green economy policy.
Sincerely, [Authors]
3

Round 2

Reviewer 2 Report (New Reviewer)

Comments and Suggestions for Authors

The authors have carefully addressed all the previous comments with thorough revisions. The manuscript has been significantly improved and is now suitable for publication. No further comments.

Reviewer 3 Report (New Reviewer)

Comments and Suggestions for Authors

The author has completed key revisions and improved interpretability. The theoretical side clearly reveals its limitations in macroeconomic applications in Section 2.2. The evidence side introduces two-way fixed effects and lagged instrument variables, and the OLS/FE/IV conclusions are consistent. The data and units are revised to actual "country × industry × year" capital investment, and the MEUR unit is corrected. The empirical results are robust, with financial services having the largest impact, followed by construction and energy. The literature review is also expanded to include cross-regional comparisons and reverse causal discussions. The quality and completeness of the paper have been significantly improved.

Reviewer 4 Report (New Reviewer)

Comments and Suggestions for Authors

The manuscript has been sufficiently improved to warrant publication in Sustainability.

This manuscript is a resubmission of an earlier submission. The following is a list of the peer review reports and author responses from that submission.

Round 1

Reviewer 1 Report

Comments and Suggestions for Authors

Your paper provides a thorough and insightful analysis of the relationship between ESG practices and corporate financial performance (CFP). One of the standout features is the comprehensive review of existing literature. The paper excels in highlighting the positive impacts of ESG practices on profitability, operational efficiency, and long-term financial stability. By consolidating findings from various studies, it effectively demonstrates how ESG initiatives can enhance revenue growth, reduce costs, and improve overall cash flow generation. This emphasis on the beneficial effects of ESG practices provides a compelling argument for their integration into corporate strategy.

However, I have a few minor suggestions:

1. The exact referencing system applied in the paper appears somewhat inconsistent. If the paper aims to use the Harvard referencing style, the citations should be formatted as follows:

Friede et al. (2015) should be cited whiteout square brackets, or to be precise as: Friede et al. (2015) provide an extensive review, reporting that over 90% of the literature reveals a non-negative relationship between ESG and financial performance, with the majority indicating positive results.
In Harvard style, in-text citations typically include the author's last name and the year of publication in parentheses. 

4. The construction of some sentences could be improved for better style and readability. The current format is somewhat cumbersome and inconsistent with typical academic writing standards. Also, the overall structure of the text is logical, but the flow could be improved by ensuring smooth transitions between sections.

For instance, to improve section 2, authors could ensure consistency in terminology and avoid repetition, such as the double mention of ESG's introduction in 2004. Streamline the comparison between ESG, CSR, and SRI by using clear, concise language and structured transitions. Enhance readability by breaking down complex sentences and integrating examples more fluidly. Ensure that each concept is distinctly defined and compared, highlighting their unique characteristics and practical implications for investors.

2. While ESG practices can positively impact a firm's cash flow, it is also possible that inherently competitive and profitable firms are more likely to adopt these practices. This bidirectional relationship highlights the complexity of assessing the true impact of ESG on financial performance. Your text provides a thorough overview of how ESG practices can impact a firm's cash flow through various mechanisms. However, it raises an important question about reverse causality: What if it is actually the competitive firms, those with high profitability and other advantageous characteristics, that are more likely to adopt ESG standards? This question of reverse causality is significant in the literature on ESG and financial performance. Some studies suggest that firms with strong financial performance and competitive advantages are more capable of investing in ESG initiatives. For instance, companies with higher profitability might have more discretionary funds to allocate towards ESG initiatives.

4. Your text could benefit from consolidation to clearly distinguish between studies that report positive, negative, and mixed relationships. This would help readers understand the overall landscape of findings more effectively.

Potential suggestion for consolidation of findings:

Positive Relationships: Highlight studies that consistently report positive correlations between ESG and financial performance. These studies suggest that ESG practices can enhance profitability, operational efficiency, and long-term financial stability.
Negative Relationships: Include studies that report negative impacts of ESG on stock returns and ROA, indicating that sustainability commitments might come at the expense of firm value.
Mixed Relationships: Discuss studies that show mixed results, revealing ambiguous influences of ESG variables depending on the rating provider.

Statistical Significance and Intensity:

Statistical Significance: Ensure that the text not only mentions whether relationships are statistically significant but also provides context on the magnitude of these relationships. For example, studies that find a statistically significant positive impact of ESG on stock returns should specify the percentage increase in returns or other relevant metrics.
Intensity of Relationship: Discuss the intensity of the relationship by providing examples of how ESG practices lead to substantial changes in financial performance. For instance, employee satisfaction, a component of ESG, significantly boosts firm value over a long period.
True Relationship:

Causality: Address the issue of reverse causality more explicitly. Higher-value firms with strong financial performance may be better equipped to adopt ESG practices, which in turn could enhance their financial performance. This bidirectional relationship should be explored in detail to understand the true impact of ESG on CFP.
Long-Term vs. Short-Term: Differentiate between the long-term and short-term impacts of ESG practices. Some studies suggest that the benefits of ESG are more pronounced over longer time horizons, while others indicate immediate financial gains or losses. And that leads to the question is the Discounted Cash Flow (DCF) perspective meaningful for short-term cases in the context of ESG?

Author Response

Please see the attachment

Author Response File: Author Response.docx

Reviewer 2 Report

Comments and Suggestions for Authors

The proposed methodology aims to identify four primary mechanisms through which ESG characteristics impact corporate financial performance (CFP), framed within the numerator (cash flow) and denominator (discount rate) components of the discounted cash flow (DCF) model.

A significant concern with the research lies in the lack of clarity regarding the specification of dependent variables within the proposed methodology. For instance, in Section 3.1, the authors analyze 16 studies (Table 2) employing various performance metrics; however, many of these metrics are not directly aligned with the DCF framework. This inconsistency is evident throughout the paper, as the authors categorize the reviewed studies by thematic groups without establishing clear methodological coherence with DCF principles.

In Section 2, "ESG Characteristics Versus CSR and SRI Criteria," the authors attempt to differentiate between ESG, Corporate Social Responsibility (CSR), and Socially Responsible Investing (SRI) criteria. However, the explanation lacks citations from existing scientific literature (there is no reference), leaving the distinctions between these concepts vague and underdeveloped. 

The study exhibits imprecision in several critical aspects. For example, the authors should begin with a formal representation of the DCF model and explicitly define the dependent variables within this context. While DCF valuation is influenced by multiple factors (such as changes in net working capital and weighted average cost of capital) and it is crucial to delineate which variables are examined for ESG impact and provide scientific justification for their selection. This explanation is currently absent and weakens the methodological rigor of the research.

Furthermore, the authors should articulate the literature review strategy employed to select relevant studies. Given the abundance of research on this topic, it might be more appropriate to consider a bibliometric analysis to enhance the systematic review process. 

Overall, the paper lacks the necessary scientific rigor for publication in its current form. However, it could serve as a preliminary draft that lays the foundation for a more structured and scientifically robust manuscript.

Author Response

Please see the attachment.

Author Response File: Author Response.docx

Reviewer 3 Report

Comments and Suggestions for Authors

This paper is well written and presents a clear, structured analysis of the relationship between ESG factors and corporate financial performance through the DCF model. It effectively explains how ESG influences both cash flow and risk, offering a solid financial and sustainability perspective. The alignment with specific SDGs further enhances its relevance and impact.

Below are some suggestions to improve the paper:

1. Avoid using the citation number (e.g., “[13]”) as the subject of the sentence without context. Instead, consider introducing the authors by name (e.g., "Author et al.") or integrating the reference more fluidly into the sentence. This enhances clarity and aligns with academic writing standards, particularly when presenting a key conclusion or viewpoint.


2.  The "Summary Conclusions" section is generally well-structured, but a few minor typos and stylistic inconsistencies, such as inconsistent use of hyphenation ("cash-flow" vs. "cash flow")

Updated：

Main Question Addressed by the Research

How ESG (Environmental, Social, and Governance) factors influence corporate financial performance (CFP) through mechanisms conceptualized within the Discounted Cash Flow (DCF) framework through impacts on cash flows, idiosyncratic risk, systematic risk, and downside risk?

Originality and Relevance

The topic is relevant in both academic and practitioner circles, especially amid global emphasis on sustainable finance and ESG integration. While not wholly original—many meta-analyses and empirical studies exist—the paper’s use of the DCF framework to map ESG effects onto specific financial channels and SDG goals is a structured and valuable synthesis that addresses a critical gap: the need to clarify the causal transmission mechanisms between ESG and CFP. However, the paper is more of a comprehensive literature review than a novel empirical or theoretical contribution. It is original in the way it categorizes mechanisms but not necessarily in terms of methodological innovation.

Contribution to the Field

Compared with existing literature, this review:

• Adds structure and clarity by framing ESG–CFP relationships within a DCF lens (numerator = cash flow; denominator = discount rate).
• Offers a unique mapping of financial mechanisms to specific UN SDGs, bridging finance and sustainability objectives.
• Compiles a wide array of empirical results across geographies, timeframes, and ESG dimensions, aiding meta-understanding.
• Helps explain inconsistencies in ESG-CFP findings by exploring causal ambiguity and ESG data divergence.

Methodological Improvements Needed

• The study does not conduct new empirical work and relies on literature synthesis. To improve:
  • One would include a meta-analytic component or statistical aggregation to quantify average effect sizes across studies.
  • Also, standardized criteria for study inclusion/exclusion, as the current review risks selection bias.
  • Discuss in more detail how causality could be tested (e.g., using instrumental variables or difference-in-differences frameworks).

Consistency of Conclusions with Evidence

The conclusions—asserting a generally positive relationship between ESG performance and CFP—are mostly consistent with the body of evidence presented, especially regarding:

• Lower idiosyncratic risk
• Reduced downside risk
• Enhanced cash flows
• Lower cost of capital

However, some nuances and negative/mixed findings are underemphasized, particularly:

• Regional differences (e.g., China’s negative/insignificant results)
• Conflicting findings on systematic risk and beta values
• Cases where ESG performance leads to increased short-term costs or volatility

These should be more thoroughly addressed in the conclusion to avoid overgeneralization.

References

The references are appropriate

Best,

Author Response

Please see the attachment.

Author Response File: Author Response.docx

Reviewer 4 Report

Comments and Suggestions for Authors

1. I did not see that the authors reported their methods for searching, selecting, and excluding literature. The authors should supplement this or explain why they adopted this format. 
2. Regarding different ESG rating systems, the authors should briefly assess their indicator composition, data source differences, and potential impact on the results.
3. It is recommended to select two representative companies and conduct a brief analysis of their ESG practices and cash flow performance to enhance the paper’s persuasiveness and readability.
4. The authors should appropriately discuss potential biases or exceptions to the paper’s conclusions (for example, in certain countries or specific industries).

Author Response

Please see the attachment.

Author Response File: Author Response.docx

Reviewer 5 Report

Comments and Suggestions for Authors

The article does not meet the requirements of scientific articles. There are no research hypotheses included, and no data analysis was carried out. It is possible to download data from Eurostat databases and perform analyses on this basis. The authors did not use this opportunity. The authors did not include sufficient conclusions in the article. Therefore, my decision is to reject the article without the possibility of correction.

Author Response

Thanks you for your comments. We have now included a research question in the introduction section and intend to answer by revising current academic literature. Please see the attachment.

 

Thanks again,

Paris.

Author Response File: Author Response.docx

Reviewer 6 Report

Comments and Suggestions for Authors

Thanks for the opportunity to review this manuscript on “ESG and Corporate Financial Performance: A Discounted Cash-Flow Perspective with Sustainability Implications”. Overall, the paper covers an interesting topic, but I have several minor concerns about the paper. Please see my comments below.

1. The content of the introduction is somewhat verbose.
2. The marginal contribution of the paper was not well discussed in the introduction.
3. The format in the text is quite confusing, with many sentences using the reference number as the subject. See the following examples:

• [2] provide an extensive review, reporting that over 90% 65 of the literature reveals a non-negative relationship between ESG and financial performance, 66 with the majority indicating positive results.
• [13] concludes that ESG can enhance CSR highlighting that further efforts are needed to standardize and supervise ESG practices due to the complexity that arises when comparing metrics across different regions and sectors.
• [16] use panel data from Chinese listed companies from 2017 to 2021, with Reuters as the source for stock prices and ESG scores. They find that ESG scores negatively correlate with Tobin’s Q, indicating that Chinese stocks tend to be undervalued as their ESG ratings increase.

         ……

4. The interpretation of existing literature in the section three to five is relatively simple, and the depth of theoretical analysis needs to be improved.
5. The summary conclusion is somewhat brief.

I hope you find my comments helpful. Good luck.

Author Response

Please see the attachment.

Author Response File: Author Response.docx

Round 2

Reviewer 1 Report

Comments and Suggestions for Authors

The revised manuscript demonstrates significant progress in addressing the earlier feedback. The structure is more coherent, and the integration of literature is more comprehensive and overall, more composite in positive sense. The authors have made a commendable effort to clarify the mechanisms linking ESG practices to corporate financial performance (CFP), particularly through the discounted cash flow (DCF) framework. The inclusion of detailed tables and case studies adds depth and clarity to the analysis and statistical robustness improvement is obvious.

Also, to agree now manuscript adheres to the Vancouver referencing style, which is a valid and widely accepted academic format, particularly in scientific and technical disciplines.

Reviewer 2 Report

Comments and Suggestions for Authors

Thank you for the revisions and the effort to address the comments. However, in my opinion, the paper still does not meet the standards for publication, even in its revised form. It remains difficult to follow, and it is challenging to extract clear, scientifically valuable conclusions from the work.

Reviewer 5 Report

Comments and Suggestions for Authors

In the previous review, I suggested that the authors use data from Eurostat databases to conduct the analysis and, based on that, formulate the conclusions of the publication. They did not do this. I cannot see the aim and research hypotheses as well.  

Finally, I acknowledge that the reviewer's comments have not been taken into account in the current version of the article, and I maintain my decision to reject the publication.