Durham University Business School says stronger ESG performance can materially reduce the risk of failure and earnings volatility in tourism companies, according to new research tracking businesses across 26 countries over a 16-year period.
The study examined tourism companies between 2002 and 2018, measuring both survival outcomes and ESG performance. Researchers found that businesses with higher ESG scores had a 1.22% lower risk of volatile earnings and a 12.4% lower probability of failure than peers with weaker ESG profiles.
The paper was led by Omneya Abdelsalam and Antonios Chantziaras — both Professors of Accounting & Finance at Durham University Business School — alongside colleagues from the University of Bristol, the International Hellenic University, the University of Macedonia, and Hamad Bin Khalifa University. The researchers argue that ESG practices can strengthen stakeholder relationships and governance, building resilience in a sector that remains highly exposed to external shocks.
Professor Omneya Abdelsalam said: “Investing in sustainability is becoming increasingly important for firms — especially in the tourism sector — as they work to reduce carbon emissions, demonstrate ethical practices, and strengthen their reputation. But while these reasons are valuable in their own right, our research highlights another benefit: a strong ESG score can act as a safety net for a firm, helping to lower risk and improve its chances of survival.”
The study also found that ownership structure changes the strength of the effect. Tourism companies controlled by pension funds, which tend to prioritise long-term returns, saw ESG’s risk-reducing benefits reinforced. By contrast, companies backed by hedge funds, with shorter investment horizons, often experienced weaker or even reversed effects.
That has practical implications beyond the academic findings. For management teams, ESG may serve as a tool for attracting investment, building lender confidence, and improving governance. For policymakers, the findings support the case for more sector-specific ESG guidance and clearer reporting standards. For long-term investors, especially pension funds, the research positions ESG as a more direct mechanism for reducing downside risk rather than a purely reputational exercise.
The paper was published in the International Journal of Finance and Economics.
