Environmental, social and governance (ESG) practices and organizational resilience in Brazilian companies

ESG practices and the cost of debt: Evidence from EU countries

We explored how company transparency, as measured by ESG (Environmental, Social and Governance) disclosure, affected the employee turnover of 212 multinational corporations that were listed in the European capital market during the 2010-2017 period. We also examined the role of the business environment by looking at the company’s ESG reporting system and its economic sector. To analyze how ESG disclosure affected employee turnover at any point of its conditional distribution, we used a panel data quantile regression model. ESG disclosure was found to be negatively associated with employee turnover. Employee turnover, as well as the extent to which it is affected by ESG disclosure, was found to depend strongly on the conditional distribution of the turnover rate, the sector and whether ESG disclosure is mandatory or voluntary. Our findings were confirmed by a robustness check analysis. In conclusion, the relationship between company transparency and employee turnover depends strongly on the institutional context and, especially, on disclosure regulation. The more a company is scrutinized, the more it will try to be socially responsible to maintain and/or improve its reputation and thus reassure and satisfy its stakeholders. Abstract We sought to analyze the relationship between ESG (Environmental, Social and Governance) disclosure and employee turnover. We also examined how this relationship is affected by regulation of ESG reporting and by sector characteristics. A panel data quantile regression model was applied to data from 212 multinational corporations that were listed in the European capital market during the 2010-2017 period. ESG disclosure was found to be negatively associated with employee turnover. Employee turnover, as well as the extent to which it is affected by ESG disclosure, was found to depend strongly on the conditional distribution of the turnover rate, the economic sector, and whether ESG disclosure is mandatory or voluntary. A robustness check clearly confirmed our findings.

PurposeThis study aims to examine the relationship between environmental, social and governance (ESG) disclosure, firm risk and stock market returns within the Chinese energy sector. Using a variety of econometric techniques, the study seeks to uncover the impact of ESG disclosure on risk mitigation and its influence on stock market performance.Design/methodology/approachBenchmark regression models were used to explore the associations between ESG disclosure, firm risk and stock returns. To address potential endogeneity, a generalised method of moments estimator is used. Quantile regression was used for robustness analysis.FindingsThe study reveals a negative relationship between ESG disclosure and firm risk, indicating that companies with greater ESG disclosure tend to experience reduced risk exposure. In addition, a positive association is observed between ESG disclosure and stock market returns, suggesting that companies with more comprehensive ESG disclosure practices tend to perform better in the stock market.Research limitations/implicationsThis study implies that investors appreciate sustainable investment and incorporate ESG practices and disclosure in decision-making. Policymakers can promote transparent ESG reporting through regulatory frameworks, fostering sustainable practices in the energy sector.Originality/valueDespite the mounting concerns over carbon dioxide emissions and the energy industry’s environmental footprint, this study pioneers a comprehensive analysis of ESG disclosure within this critical sector. Delving into the relationship of ESG practices, firm risk and market returns, this research uniquely examines both risk mitigation and return enhancement, shedding new light on sustainable strategies in the energy domain.

Although legitimacy theory provides strong arguments that environmental, social and governance (ESG) disclosure and performance can help mitigate firm-specific (idiosyncratic) risks, this relationship has been repeatedly challenged by conceptual arguments, such as ‘transparency fallacy’ or ‘impression management’, and mixed empirical evidence. Therefore, we investigate this relationship in the revelatory case of initial public offerings (IPOs), which represent the first sale of common stock to the wider public. IPOs are characterised by strong information asymmetry between firm insiders and society, while at the same time suffering from uncertainty in firm legitimacy, culminating in amplified financial risks for both issuers and investors in aftermarket trading. Using data from the United States, we demonstrate that (1) voluntary ESG disclosure reduces idiosyncratic volatility and downside tail risk and (2) higher ESG ratings have lower associated firm-specific volatility and downside tail risk during the first year of trading in the aftermarket. We provide theoretical arguments for the relationships observed, suggesting that companies striving for ESG performance and communicating their efforts signal their compliance with sustainability-related norms, thus acquiring and upholding a societal license to operate. ESG performance and disclosure help companies build their reputation capital with investors after going public. We also report that ESG disclosure is a more consistent proxy for ex-ante uncertainty as an indicator of aftermarket risk, thereby replacing some of the more conventional measures, such as firm age, offered in the existing literature.

This study examines the effect of ESG (Environmental, Social, and Governance) disclosure on the performance of real estate companies in the ASEAN-6 region, with CEO tenure as a moderating variable. Using panel data from 2016 to 2023, covering 424 observations of real estate firms listed on ASEAN-6 stock exchanges, this study employs the Random Effect Model (REM) to analyze the relationships between variables. The findings reveal that ESG disclosure has a negative and significant impact on firm performance, as measured by Tobin's Q. However, the interaction between ESG disclosure and CEO tenure exhibits a positive and significant effect. These results indicate that longer-tenured CEOs can moderate the relation-ship between ESG disclosure and firm performance. The implications of this research provide valuable insights for companies to enhance ESG transparency and consider leadership stability in optimizing long-term performance.

Purpose This paper aims to study how corporate governance and country-related contextual factors affect the relationship between board gender diversity and environmental, social and governance (ESG) disclosure in its components: governance, social and environmental. Design/methodology/approach Using ordinary least-squares and two-stage least squares (2SLS) regressions, and retrieving ESG disclosure data from Bloomberg’s database, the paper analyses a sample of European nonfinancial listed firms (1,935 firm-year observations) over the period 2014–2022. The study adopts board independence and board cultural diversity as structural and demographic board attributes that characterize the corporate governance environment in which female directors operate; the enforcement of law and gender equality as country-related institutional and cultural factors. Findings Results suggest that female directors may substitute board independence in improving ESG and governance disclosure, whilst they co-occur with board cultural diversity in increasing ESG, governance and social disclosure. Findings indicate that the enforcement of law increases the positive effect of female directors on environmental disclosure and lowers the impact on governance disclosure. Conversely, a more gender-equal environment enhances female directors’ engagement in improving governance disclosure, reducing their beneficial effect on environmental information. Originality/value This study contributes to the literature suggesting that structural and other demographic board contextual aspects, as well as institutional and cultural country-related contextual factors, affect the relationship between board gender diversity and ESG disclosure differently and the effect may vary depending on ESG disclosure.

Purpose The term environmental, social and governance (ESG) has gained momentum in recent years. Thus, understanding its underlying driving mechanisms has become increasingly intriguing. In this study, we examine the effects of economic policy uncertainty (EPU), climate policy uncertainty (CPU) and geopolitical risk (GPR) on firms’ ESG disclosure. Design/methodology/approach To achieve the paper’s goal, we use the mixed data sampling (MIDAS) regression model on a sample of 500 firms from the US stock market. Findings The results indicate that EPU and GPR have significant adverse effects on ESG performance, whereas the CPU index exhibits a positive impact. However, the significant associations of CPU and GPR with ESG score observed in the whole sample do not hold consistently across industries. This suggests that, while overarching trends might exist, individual sector characteristics and varying external influences can shape the relationship between uncertainty factors and ESG performance. This highlights the importance of context when analyzing ESG practices across different industries. Furthermore, we identified a range of influential financial parameters that drive ESG practices. Practical implications The findings of our study have significant implications for many parties including policymakers, managers, governments, investors and shareholders. Additionally, sector-specific policies may be needed to encourage sustainable practices, particularly in industries sensitive to environmental and geopolitical risks. Originality/value The paper’s originality lies in its examination of the combined impact of EPU, CPU, and GPR on ESG disclosure – a relationship rarely explored in existing literature. Using the MIDAS model, it provides a more refined analysis by integrating both high- and low-frequency data. The study also offers industry-specific insights, revealing how these external uncertainties affect ESG disclosure differently across sectors. By incorporating financial drivers and offering policy implications, this research presents a novel and comprehensive approach to understanding ESG disclosure under increasing global uncertainties.

PurposeEnvironmental, social and governance (ESG) factors have become increasingly important in investment decisions, leading to a surge in ESG investing and the rise of sustainable investment assets. Nevertheless, challenges in ESG disclosure, such as quantifying unstructured data, lack of guidelines and comparability, rampantly exist. ESG rating agencies play a crucial role in assessing corporate ESG performance, but concerns over their credibility and reliability persist. To address these issues, researchers are increasingly utilizing machine learning (ML) tools to enhance ESG reporting and evaluation. By leveraging ML, accounting practitioners and researchers gain deeper insights into the relationship between ESG practices and financial performance, offering a more data-driven understanding of ESG impacts on business communities.Design/methodology/approachThe authors review the current research on ESG disclosure and ESG performance disagreement, followed by the review of current ESG research with ML tools in three areas: connecting ML with ESG disclosures, integrating ML with ESG rating disagreement and employing ML with ESG in other settings. By comparing different research's ML applications in ESG research, the authors conclude the positive and negative sides of those research studies.FindingsThe practice of ESG reporting and assurance is on the rise, but still in its technical infancy. ML methods offer advantages over traditional approaches in accounting, efficiently handling large, unstructured data and capturing complex patterns, contributing to their superiority. ML methods excel in prediction accuracy, making them ideal for tasks like fraud detection and financial forecasting. Their adaptability and feature interaction capabilities make them well-suited for addressing diverse and evolving accounting problems, surpassing traditional methods in accuracy and insight.Originality/valueThe authors broadly review the accounting research with the ML method in ESG-related issues. By emphasizing the advantages of ML compared to traditional methods, the authors offer suggestions for future research in ML applications in ESG-related fields.

Environmental, Social and Governance (ESG) disclosure, competitive advantage and performance of firms in Malaysia

This research explores the disclosure of Environmental, Social and Governance (ESG) factors and their relationship with company performance. This research argues that ESG disclosure can influence a company's reputation, financial performance, analyst forecast accuracy, market valuation, and corporate decisions. By using ontological, epistemological and axiological approaches in the field of accounting, this research aims to understand the relationship between ESG disclosure and company performance. The literature review method was used to identify and evaluate relevant previous research. The findings indicate that there is a consensus in the literature regarding the positive relationship between ESG disclosure and corporate financial performance. This research also combines the ESG Rating Model and Environmental, Social and Governance indicators developed by MSCI to assess companies' ESG performance. A philosophical understanding of ESG in terms of ontology, epistemology, and axiology—which relate to the nature of reality, theories of knowledge, and values—reveals that ESG is closely related to moral, economic, and social values, as well as factual and normative knowledge. This research concludes that companies that integrate good ESG practices not only fulfill their social and environmental responsibilities but also achieve better financial performance, emphasizing the importance of ESG as a strategic consideration in business and investment decision-making and the long-term survival of companies.

Given that stakeholders are paying more and more attention to the environmental, social, and governance (ESG) policies of firms, the objective of this paper is to study the effect of ESG disclosure on firm performance, focusing on companies involved in port activities; precisely, (i) a port company/authority, (ii) a terminal operator/stevedore, and (iii) an integrated carrier. The study contributes to the existing knowledge by incorporating ESG scores and looking at factors that indicate financial strength. The contribution of our study will lie in complementing and adding to the existing knowledge, along with further incentivizing sustainable firm performance. This study discovers that a positive relationship between ESG disclosure, firm value, and firm performance exists, as determined by market-to-book ratio and Q ratio, respectively. It considers a panel regression examination, by means of a sample of 213 publicly listed ports and considering a time period of 5 years. This study will benefit scholars, decision-makers, legislators, and stakeholders of ports through improving their comprehension of how ESG disclosure affects the performance of firms, in general and specifically for each pillar. Highlights The aim of the present study is to examine the impact of ESG (environmental, social, and governance) disclosure on the performance of firms that are engaged in port-related operations. More specifically, our focus is on three types of companies, namely, a port company/authority, a terminal operator/stevedore, and an integrated carrier The present study has found that a favorable correlation exists between ESG disclosure, firm value, and firm performance, as gauged by the market-to-book ratio and Q ratio, correspondingly The study conducts a panel regression analysis, utilizing a sample of 213 publicly listed ports over a time period of five years This study will be advantageous to scholars, decision-makers, legislators and stakeholders in the port industry, as it enhances their understanding of how ESG disclosure impacts firm performance, both globally and within each distinct pillar

The challenge of Environmental, Social and Governance (ESG) has been identified as being inextricably linked to organisational culture, with these aspects being embedded within the company’s values and practices. The companies’ commitment in promoting sustainability, diversity and ethics in their activity is considered to be a prerequisite for effective performance in relation to all categories of stakeholders. The increased interest in the relationship between ESG and financial performance has led to a substantial volume of research. This paper’s objectives are to broaden the discussions of the relationship between ESG and financial performance, through a bibliometric analysis of 1461 articles. The following themes were identified as the primary subjects of research: corporate disclosure of ESG information and financial performance; ESG, volatility, risk and return; corporate ESG performance and dividend payment; the financial performance indicators in association with ESG performance; ESG, development, innovation, digitisation; ESG performance and earnings management; and ESG controversies and business performance. The trends in the research of the topic concerned the particularities of the relationship between the variables in times of crisis, the correlation between the variables moderated by reporting, the analysis of different ESG ratings, green financing, the particularities in the banking system, materiality and sectoral particularities, as well as ESG disclosure and corporate financial flexibility. The results of the study enhance understanding of this relationship, being useful to both stakeholders and scholars, identifying trends and tendencies in this issue, and providing directions for future studies to establish the determining factors and performance practices.

The goal of this study is to comprehend how local culture affects ESG (Environmental, Social, and Governance) disclosure and how culture-influenced ESG innovation can enhance corporate sustainability performance. This study uses a systematic literature review (SLR) approach with the PRISMA method to consolidate relevant studies related to the impact of culture on ESG disclosure. The results show that local culture influences ESG disclosure through social and ethical values. Aligning ESG innovation with culture and institutional support enhances sustainability performance, thereby enhancing the effectiveness of the contextual ESG framework in achieving corporate sustainability. This study emphasizes the importance of a local, culture-based ESG framework and encourages the integration of cultural values in ESG reporting and innovation to support global sustainability. This research offers a new perspective on the impact of local culture on ESG transparency, enriching the literature with a cultural approach to build a more inclusive ESG framework

This research aims to investigate the moderating effect of environmental, social and governance (ESG) disclosure on the sensitivity of executive pay to market performance (pay-performance sensitivity - PPS) in Brazilian companies listed in the B3 IBrX-100 index. It also investigates the factors that influence PPS in order to seek explanations for the effect of ESG disclosure on PPS and to identify which theoretical perspective (agency theory, stakeholder theory, or the good governance view) can support the results found for Brazilian companies. It highlights the importance of monitoring ESG disclosure in the Brazilian capital market, as well as helping to understand whether or not ESG disclosure contributes to the extraction of shareholder income by executives, and provides insights for new research to be conducted considering ESG disclosure. The results have implications for understanding the principal-agent relationship and for understanding ESG disclosure in conflict mitigation when used by companies to improve PPS. A total of 81 companies were analyzed between 2016 and 2021. The method used for the main analyses was the ordinary least squares regression model (with robust standard errors), while quantile regression was used for the robustness analysis. The results indicate that ESG disclosure maximizes the sensitivity of executive pay to market performance. This study contributes to the literature by providing new evidence on PPS and identifying which theoretical perspective supports the results found in the Brazilian context. It also contributes to organizations by showing that ESG investments can mitigate agency problems and by revealing the importance of ESG implementation for firms, given the evidence of a positive impact on PPS. It contributes to society by encouraging organizations to invest in ESG issues.

Companies and investors in emerging markets have started paying attention to ESG (Environmental, Social, and Governance) issues. There has been a growing demand for aligning ESG disclosure of companies to UN SDGs (United Nations Sustainable Development Goals), so understanding how the firm-level ESG affects the country-level SDG is very important for evaluating the advances in ESG and SDG implementation in emerging markets. This study examines the linkage between firm-level ESG disclosures and their relationship with country-level SDG scores over ten years for three emerging countries: India, China, and Brazil. The analysis of 1,500 top-listed firms in these countries reveals an increasing trend of firms going for ESG disclosures and increased ESG scores over the years in the three markets. Out of the total sample, almost 75% of firms make ESG disclosures in Brazil, followed by 54% in India and 32% in China. Additionally, companies in all these countries tend to emphasize governance-related disclosures more, with Brazil having higher ESG disclosures than India and China. The correlation and causality tests indicate a significant positive correlation between mean ESG scores and country-specific SDG scores. The Dumitrescu-Hurlin panel causality tests provide stronger linkages between firm-specific Environment scores and SDG scores, indicating that a firm’s environment disclosures translate into higher SDG scores. However, the same is not valid for Social and Governance factors. These findings have important implications given the global attention on the linkages between ESG disclosure and SDG score. AcknowledgmentsThe financial and infrastructure support provided by FORE School of Management, New Delhi in completing this paper is gratefully acknowledged.