INFLUENCE OF ESG RATINGS ON THE COST OF CAPITAL OF INDUSTRIAL ENTERPRISES

Abstract

The article presents a comprehensive study on the mechanisms through which ESG ratings, acting as a key nonfinancial indicator, influence the formation of capital structure and the cost of capital for industrial enterprises amidst global economic transformation. The paper examines in detail the process of integrating environmental, social, and governance criteria into traditional financial asset valuation models, which is shifting international investors' approaches to determining risk premia. A systematic analysis and synthesis of contemporary empirical research results from international capital markets confirm the transformation of ESG factors from ethical obligations into the realm of pragmatic long-term financial risk management. The research methodology is based on the structural decomposition of the Weighted Average Cost of Capital and the isolation of specific transmission channels through which ESG risks affect its components. The mechanism for optimizing the cost of debt financing is described, which is realized through mitigating information asymmetry between the borrower and the lender, reducing the reputational risks of banking institutions, and providing an «insurance» effect against default for companies with significant operating and financial leverage. Particular attention is given to modeling the cost of equity capital, demonstrating how high ESG standards contribute to lowering systematic risk and increasing stock market liquidity through access to the investment mandates of global responsible funds. The results of summarizing empirical data demonstrate a measurable financial effect from implementing ESG strategies: a potential reduction in the cost of raising debt capital in the range of 5–20 basis points and a decrease in the cost of equity capital by 0.50%–1.00% has been established. These figures quantitatively confirm the existence of the market «Greenium» effect and indicate that active management of the ESG profile is a critically important condition for ensuring access to cheaper long-term financing necessary for the technological modernization and sustained competitiveness of industrial businesses.