Environmental, social, and governance (ESG) model; impacts and sustainable investment – Global trends and Poland's perspective

Abstract

In recent years, financial markets have been hit hard by the Great Financial Crisis of 2008, the acceleration of climate change, and now the COVID-19 pandemic. The result of these events is the acceleration of the implementation of a new model of socioeconomic development of societies referred to as the environmental, social, and governance (ESG) model. It has been particularly evident in the financial investment sector. Analyses of the relative performance of ESG funds is inconclusive due to the lack of a clear definition of responsible investments, and insufficient quality of the available data and ESG ratings. However, most of the studies find a positive correlation between ESG factors and company's financial performance. The analyses showed that these positive results are more pronounced over the longer term and impact the stock prices of those companies. ESG funds offer better downside protection during crises in relation to traditional funds. Despite the lack of legal barriers, the Polish economy has experienced very long delays in implementing the ESG model and the gap is even more pronounced in the financial industry. This is surprising as Poland is a very interesting market for sustainable investment given its current underdevelopment and overall potential related to green transformation. In Poland, only 17 investment funds deeply integrate ESG criteria. Educational and communication barriers have been identified as the main obstacles to the development of the sustainable finance market in Poland. Education of all participants in investment processes is a prerequisite for success.