ESG disclosure and financial performance in debt market: evidence from the oil and gas industry

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.

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.

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.

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

Currently, businesses are very vulnerable and exposed to the uncertainty that may cause damage to the company. With the ongoing pandemic issue, companies are more concerned about their performance and survival. Companies like banks play a crucial role in the economy since its growth depends on its financial sector's stability regardless of the country. Thus, companies have many approaches and strategies to maintain their business and stay relevant in the corporate world; hence, ESG disclosure comes in handy. According to the Bursa Malaysia Sustainability Reporting Guide (2018), ESG which stands for "Environmental, Social, and Governance" is a term used extensively, specifically by the investment community, portraying the environmental, social, and governance matters considered by investors in the corporate behaviour context. Experts have actively discussed ESG disclosure to address such reporting to enhance the company's performance portfolio. Furthermore, the ESG factor becomes one of the primary considerations for the investors' decision. ESG factor influences and strengthens the investors' confidence towards the company's performance. Bukhari, Hashim and Amran (2020) suggested that companies providing ESG disclosure show improvement in their financial performance. Experts found a significant impact of sustainability practices on the Islamic banks' financial performance (Jan, Marimuthu & Isa, 2019). Companies' ESG disclosure performance has established a reputation for playing a significant role in financial transparency and how it varies by economic and stakeholder's perspective (Oncioiu, Popescu, Aviana, Serban, Rotaru, Petrescu & Pantelescu, 2020). Jan et al. (2019) found that there is still a low adoption level of sustainability practices and reporting in the Islamic banking industry. An empirical study conducted by Nobanee and Ellili (2016) also stated that sustainability disclosure has an insignificant effect on Islamic banks than the high degree of such disclosure on conventional banks. Moreover, from a study conducted in seven Muslim countries, the sustainability practices and reporting were not of serious concern to those countries' Islamic banks (Hassan and Syafri Harahap, 2010). Keywords: Environment, Social, Governance (ESG) Disclosure, Islamic Banks, and Financial Performance.

With the increasing impact of environmental, social and governance (ESG) on the world, this paper aims to discuss the current situation of ESG applications in China and abroad, as well as the corresponding impact of ESG disclosure, rating and investment. Furthermore, the paper adopts a systematic review method to sort out related literatures in the field of ESG, and then discusses the interaction of the three parts and the cyclical role of the components. The discussion found that investors attach great importance to the ESG disclosure and rating, and more and more mainstream investors are incorporating ESG factors into their investment decision-making process. Moreover, ESG disclosure, rating and investment are complementary to each other. If an enterprise discloses ESG information well, it will receive a relatively impressive ESG rating, which will ultimately attract more investors. Subsequently, as investment increases, companies will pay more attention to ESG disclosure, creating a virtuous circle.

Purpose We aim to construct the environmental, social and governance (ESG) ranking based on voluntary disclosures in an emerging market where ESG ratings are unavailable and investigate the factors influencing a firm’s ESG ranking. Design/methodology/approach We analyzed ESG disclosures on corporate webpages and annual reports for firms listed on the Pakistan Stock Exchange (PSX) and ranked the firms on ESG dimensions. Further, we examined the impact of the firm’s financial characteristics on ESG performance using panel regressions for 2017–2022. Findings Firms’ disclosures were strongest in the governance dimension but weaker in environmental and social dimensions. Our ESG rankings show banks as the highest and refineries as the lowest-ranked sectors. Regression analysis indicates that firms with strong financial performance and low leverage performed better across ESG dimensions. While the overall impact of ESG rankings on firm performance is unclear, stronger environmental rankings seem to offer a competitive advantage. Practical implications As global capital markets move towards sustainable investing, ESG rankings can help Pakistan to attract foreign inflows. Further, findings on poor disclosures on environmental and social dimensions highlight the need for a standardized ESG reporting framework to make firms’ sustainability efforts more transparent to stakeholders. Social implications Measurement and availability of ESG rankings will increase ESG awareness in investors and will encourage companies to allocate resources towards sustainable business practices. Originality/value This research is the first attempt to gauge the ESG performance of PSX-listed firms and identify the firm characteristics indicative of ESG performance in an emerging market context.

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.

Purpose - ESG(Environmental, Social and Governance) rating is an indicator to predict the sustainable development and long-term value creation of enterprises, which is becoming more and more important. This study divided the ESG rating into each sector(E, S and G) to identify which ESG elements are effective in enhancing enterprise value according to the characteristics of the enterprise, which is different from previous studies. Design/methodology/approach - In this study, Bloomberg ESG Disclosure Score was used to empirically analyze the relationship between ESG ratings and corporate value by taking the listed companies of China’s Shanghai Composite Index from 2017 to 2020 as the object. Findings - First, the relationship between ESG ratings and enterprise value shows a statistically significant positive correlation, which supports the results of previous studies. Second, the analysis results from the classification of ownership structure of enterprises (state-owned enterprises and non-state-owned enterprises) show that compared with state-owned enterprises, the ESG ratings of non-state-owned enterprises is more closely related to enterprise value. Third, the analysis of various industries (manufacturing and non-manufacturing) shows that compared with manufacturing, ESG scores of non-manufacturing has a more positive effect on enterprise value. Lastly, the analysis by industry type (heavy-contaminated companies, non-contaminated companies) confirmed that ESG scores of non-contaminated companies has a positive effect on corporate value than heavy-contaminated companies. Research implications or Originality - This study classified ESG evaluation grades(E, S and G) for listed companies in China and analyzed in detail how they affect corporate value according to corporate characteristics, drawing implications for what ESG indicators should be focused on to increase corporate value.

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.

Environmental, social and governance (ESG) criteria mean investment in economic choices which, without interference with the environment, are intended to promote long-term economic and social well-being. Due to high environmental and social awareness, customers expect companies to devote time and efforts to such sustainable practices. This attitude has led to an overall rise in ESG disclosures and reporting instruments globally with a focus on influence of ESG disclosures on financial performance of companies. Many European countries have already introduced mandatory disclosure of non-financial information. This transition from voluntary to mandatory motivated other countries to adopt mandatory ESG disclosure practices for sustainable development. The practice of reporting non-financial disclosures has been rising due to several reasons, such as increasing visibility, informing customers, avoiding the risk associated with firm performance and achieving sustainability. Countries in the early stages of ESG disclosure need to understand the benchmark practices used by countries with a well-developed ESG system. For preparing the ESG disclosure index and benchmarking based on disclosure score, this study considers a set of developed and developing countries with their ESG disclosures. On the basis of ESG disclosures, the countries have been classified into four different categories. We found Norway, Sweden, Denmark, Finland, United Kingdom, Belgium and France, to have high ESG scores and have been classified as Countries with Well-Developed ESG Framework. Germany, Italy, USA, Australia, Switzerland, Canada, Japan, Brazil and South Africa have medium to high ESG scores and fall under the category Rapidly improving ESG framework. While Singapore, India, China, Philippines, Malaysia and Argentina are categorized as countries with ESG framework at developing stage, Russia, Indonesia, Thailand, Nigeria and Vietnam are classified as Countries with early-stage framework due to low ESG scores.

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

ESG in China: A review of practice and research, and future research avenues

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.

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