Environmental, Social And Governance Research Articles

Integrating ESG and organisational resilience through system theory: the ESGOR matrix

PurposeThis paper aims to develop a conceptual framework that jointly considers Environmental, Social and Governance (ESG) factors and organisational resilience (OR) components to ameliorate organisations' understanding of sustainability’s overall requirements and related decision-making processes.Design/methodology/approachThis paper combines ESG and OR through a 3x3 conceptual matrix, where ESG factors are listed along the vertical axis and OR components along the horizontal axis. This results in nine quadrants, which have been read according to two arrangements: (1) static, looking at the specific characteristics of each single quadrant, and (2) dynamic, investigating the relationships between the different quadrants according to the system theory (ST) lens.FindingsThe integration between ESG and OR results in nine organisational typologies, each characterised by a specific focus: (1) green visioning, (2) eco ethos, (3) climate guard, (4) inclusive strategy, (5) empathy ethos, (6) community shield, (7) ethical blueprint, (8) integrity ethos and (9) compliance guard. These typologies and related focuses determine the different strategic options of organisations, the decision-making emphasis concerning ESG factors and OR components and the organisation’s behaviour concerning its internal and external environment. According to ST, the nine typologies interact with each other, emphasising the existence of interconnectedness, interdependence and cascading effects between ESG and OR.Originality/valueThe paper represents a unique attempt to interrelate ESG factors and OR components according to a ST lens, emphasising the dynamic nature of their interactions and organisations’ need for continuous adaptation and learning to make decisions that create sustainable long-term value.

Main contents and implications of the 2023 revision of the OECD Guidelines for Multinational Enterprises*

Purpose This study aims to provide the main contents of the revision of the 2023 OECD Guidelines for Multinational Enterprises and suggest implications for the Korean government and multinational enterprises.Design/methodology/approach Following the brief history of the revision of OECD Guidelines for Multinational Enterprises, this study reviews and evaluates major substantive and procedural revisions of the 2023 OECD Guidelines, and then suggests countermeasures for Korean government and businesses.Findings The most significant substantive change of the 2023 revision is that expectations for environmental due diligence and disclosure obligations, including climate change and biodiversity, for multinational enterprises have been expanded and strengthened. Regarding procedural changes, the biggest change is the introduction of a basis rule for the National Contact Points for Responsible Business Conduct (NCPs for RBC) to judge each issue and a rule that the final statement must include follow-up details and deadlines, which is expected to strengthen the effectiveness of the NCP dispute resolution mechanism.Originality/value This study is the first academic paper to introduce major substantive and procedural revisions to the 2023 OECD Guidelines for Multinational Enterprises in Korea. This study also provides implications for the Korean government and companies following the 2023 revised OECD Guidelines for Multinational Enterprises as follows. First, the Korean government must establish a public–private partnership to closely communicate to prevent Korean companies from being harmed by failing to meet strengthening international Environment, Social and Governance (ESG) standards. In addition, Korean government should actively participate in ESG-related international forums, including the OECD, and strive to reflect the needs and interests of Korean companies. Second, the Korean NCP should strengthen its activities to prevent potential damage by expanding education and promotions for Korean businesses on related overseas legislative trends and NCP dispute case studies so that Korean companies can effectively deal with the strengthened ESG standards. Third, Korean multinational enterprises should preemptively establish an advanced ESG management system to seize new opportunities in the global supply chain previously concentrated in China and India in the process of reorganizing global supply chains according to the trend of strengthening ESG standards and the US value alliance strategy.

Indonesia Shariah Stock Index (ISSI) firms and environmental, social, and governance (ESG) disclosure in Indonesia

Purpose This study aims to examine the relationship of Indonesia’s Sharia Stock Index (ISSI) firms on environmental, social and governance (ESG) disclosure. This study is interesting because ISSI firms are supposed to comply with Islamic values as this has been reflected in good corporate governance activities, demonstrating responsibility to others and participating in preserving nature/environmental activities. Design/methodology/approach The authors use sample firms that are listed on the Indonesia Shariah-compliant Stock Index (ISSI) from 2011 to 2020, which also published sustainability reports. Findings The study found that sharia firms are positively related to ESG disclosure. The authors also found that ESG disclosure of sharia firms is more pronounced in the reporting section of general, economic, environmental and social. Other findings suggest differences in the segments reported in the COVID and pre-COVID periods. This result is also robust by conducting a self-selection bias test with Heckman’s two-stage regression and Coarsened Exact Matching regression. Practical implications For policymakers, these results indicate that different characteristics of firms can affect ESG disclosure, and economic conditions will determine which sectors are disclosed the most. Originality/value This study provides empirical evidence that Indonesian Shariah-compliant stock index firms carried out their mission to disclose more information about their environmental and social responsibilities and governance issues.

Continuing to Put People First: Embedding community investment in the sustainability standards of international financial institutions

AbstractWe discuss environmental, social and governance (ESG) considerations in international development projects, especially those funded by the World Bank and International Finance Corporation (IFC). Their social safeguard policies were adopted because of neglect of social impacts by projects. Although development assistance goals have shifted from economic growth towards poverty reduction and shared prosperity, mitigating adverse impacts of projects does not necessarily address the multiple dimensions of poverty or the Sustainable Development Goals. ‘Do no harm’ has limited ability to achieve social development objectives. Instead, a significant contribution to international development could come by embedding community investment in the environmental and social frameworks of international financial institutions, and social impact assessment and international development practise. This would ensure that projects contribute to improving the lives of project affected peoples. We propose changes to the IFC Performance Standards that could be implemented by other multilateral development banks and in the Equator Principles.

Companies' Bottom Lines Are Affected by ESG Factors: A Bibliometric Study

This paper topic related to the environmental, social and governance (ESG) impacts the firm’s performance. Based on 351 papers on the ESG impacts the firm’s performance in the Web of ScienceDirect from 2019 to 2023 and we use VOS viewer in present the bibliometric review for the journal, keyword, authors, and citation structure. Furthermore, the ESG impact the firm’s performance, and this contribute three objective which is to explore the relationship between ESG factors and firm performance, to analyze the role of ESG metrics and reporting standards in assessing and improving firm performance, and to highlight the importance of ESG factors in the firm’s decision-making process and their influence on markets.

ESG Performance and Enterprise Value in China: A Novel Approach via a Regulated Intermediary Model

ESG (environmental, social, and governance) performance increasingly influences enterprise valuation. While researchers debate about the precise nature of this influence, most assume a positive linear relationship. This study introduces a novel ESG responsibility performance metric utilizing a regulated intermediary model using representative data synthesized from leading ESG rating agencies in China. It investigates the pathways of this influence and examines the mediating effects of corporate reputation, stakeholder engagement, and regulatory compliance. The findings reveal an inverted U-shaped relationship between ESG performance and enterprise value, moderated significantly by financing constraints. These findings remain robust after accounting for potential endogeneity using instrumental variables. Heterogeneity analysis highlights that this inverted U-shaped relationship depends on the industry characteristics and ownership structures, particularly noticeable in non-polluting and non-state-owned enterprises. Moreover, enhanced ESG performance correlates with a reduced cost of equity financing, thereby augmenting enterprise value. Financial institutions might consider employing innovative financial instruments to diversify their enterprise financing channels and effectively bolster ESG-focused enterprises.

Do MENA firms consider climate risks? Evidence from the relationship between ESG and firm performance

ABSTRACT We investigate the moderating effect of climate risk, measured by Carbon dioxide (CO2) emissions and a Global Climate Risk Index (CRI), on the relationship between Environmental, Social and Governance (ESG) score and firm performance using data on non-financial listed firms in the MENA region during the period 2006–2021. We perform the analysis in two stages, in the first stage, we examine the impact of ESG score on firm performance. The findings show that ESG score has a negative impact on operational and financial performance and a positive effect on market performance. Next, we hypothesize that ESG will have a more positive and stronger impact on firm performance in high than low climate risk countries. The results indicate mixed evidence. In further analysis, we have examined the effect of environmental performance index and net zero initiatives on the relationship of ESG on firm performance.

The Impact of CATL's ESG Implementation on Its Enterprise Performance

In recent years, enterprises have gradually realized the significant influence of the Environmental, Social and Governance(ESG)on corporate performance. This article aims to explore that how ESG factors affect the performance of Contemporary Amperex Technology Co., Limited (CATL), a globally leading company in new energy innovation and technology. Based on relevant research on the relationship between ESG and corporate performance, the analysis is carried out from three perspectives: environmental, social, and corporate governance, to examine the impact of CATL's ESG practices on both its financial and non-financial performance. The results indicate that CATL's active implementation of ESG is conducive to improving the company's financial performance as well as enhancing its performance in environmental, social, and corporate governance aspects. As one of the representative enterprises in China's new energy industry, the analysis of CATL in this article provides insights for the sustainable development of other enterprises and calls for improving the national information disclosure system of ESG.

How to Improve the Environmental, Social and Governance Performance of Chinese Construction Enterprises Based on the Fuzzy Set Qualitative Comparative Analysis Method

The environmental, social and governance (ESG) performance of construction enterprises still needs to be improved. Therefore, in order to better utilize resources effectively to improve enterprise ESG performance, this paper explores the configuration paths for Chinese construction enterprises to improve their ESG performance using the (fuzzy set qualitative comparative analysis) fsQCA method. It was found that single conditions are not necessary to achieve high ESG performance. The improvement of the high ESG performance needs to be combined with synergistic effects of multiple conditions. The specific configuration paths consist of six types of conditions. They are the environmental goal and management-led improvement path, the environmental training and action-led improvement path, the environmental concept and partner protection joint-led improvement path, the environmental and social level synergistic improvement path and the two multifactorial composite improvement paths. Among them, the environmental concepts, environmental goal and management, environmental training and action, and partner protection are the core conditions. The other conditions also have a certain supporting role. This study will help the construction enterprises to effectively allocate resources and develop ESG strategies with limited resources. It will also provide a reference for the government to manage the ESG performance of enterprises.

Trick or treat? A bibliometric literature review of corporate social responsibility and earnings management

AbstractResearch QuestionThis study seeks to examine and synthesize the extant literature to summarize whether the essence of corporate social responsibility (CSR) genuinely stems from an authentic social commitment, or if it primarily serves as a tactic to obscure earnings management (EM) practices.Research MethodologyA systematic literature review methodology is employed to thoroughly assess 75 articles selected from the Web of Science and Scopus databases, integrating bibliometric techniques, and following the Preferred Reporting Items for Systematic Reviews and Meta‐Analyses (PRISMA) guidelines.Research FindingsAmid evolving economic and social landscapes, the research of the CSR‐EM relationship increases, particularly in Asian contexts. Further research found that ESG (environmental, social, and governance) was gradually introduced into the theoretical framework of CSR‐EM. However, most of the research does not study the impact of the three dimensions of ESG, respectively. The study concludes the four varied CSR‐EM relationships: positive, negative, mixed (depending on EM type), and no correlation, and suggests that this should be determined by both macro (e.g., political and economic environment) and micro determinants (e.g., industries and governance). Therefore, the CSR‐EM relationship cannot be simply generalized. At present, most studies study CSR as a whole, and some literature uses CSR disclosure and performance to measure CSR respectively. However, distinctions between CSR disclosure and performance, namely CSR decoupling, remain underexplored.Theoretical and Practical ImplicationsThis review synthesizes four key findings and summarizes seven relevant theories from existing literature, thus enriching the theoretical contributions of CSR‐EM research. It underscores the significance of both macro and micro factors on the CSR‐EM relationship, introduces the concept of CSR decoupling, and outlines directions for future studies. The review offers insights for policymakers on CSR‐EM dynamics and suggests strategies for companies to enhance CSR practices and reporting consistency.

Gender of firm leadership and environmental, social and governance (ESG) reporting: evidence from banks listed on Ghana Stock Exchange

PurposeThis study aims to examine how woman corporate leadership indicators and environmental, social and governance (ESG) disclosure in listed banks on Ghana Stock Exchange are related.Design/methodology/approachData was obtained from the audited annual reports of the banks for the period 2006–2020. Empirical result estimation was achieved using Panel Corrected Standard Errors.FindingsThe result revealed that female chief executive officer (CEO), female board chairperson and board gender diversity are associated with higher disclosure of ESG issues in listed banks in Ghana in overall terms. However, in terms of individual disclosures, female board chairperson positively impacts social disclosure, whereas both female CEO and female board chairperson affect governance disclosure positively.Research limitations/implicationsIn this era of business where there is much emphasis on green business and investment by various stakeholders for purposes of ensuring business legitimacy, the result implies that banks must consider females to occupy the positions of CEO and board chairperson since that can help to improve ESG performance of banks.Practical implicationsIn this era of business where there is much emphasis on green business, socially responsible investment and impact investment by various stakeholders, the result implies that banks must consider improving the representation of women in leadership since that can help to improve ESG performance of banks and hence ability to attract more investors.Originality/valueTo the best of the authors’ knowledge, this is the first study to provide empirical evidence from a developing country perspective in Sub-Saharan Africa that gender of bank leadership has implications for ESG disclosure.

Addressing climate challenges through ESG-real estate investment strategies: An asset allocation perspective

Real estate plays a major role in environmental impact, contributing to nearly 39 % of global emissions and significantly influencing climate change. Using a sample of European REITs (Real Estate Investment Trusts) and real estate companies, this study examines the risk-adjusted performance of real estate investments concerning their ESG (Environmental, Social, and Governance) performance, comparing the diversification benefits of conventional versus ESG real estate investments, with a specific focus on the environmental (E) aspects. The portfolios' asset allocation is designed using the Mean-Variance and the Risk Parity models. Simulations are run using a rolling-window technique, covering the entire sample period along with three different sub-samples. According to our findings, high ESG score real estate portfolios perform similarly to the overall sector, while portfolios with environmental scores above the sample average offer enhanced diversification benefits. This finding is particularly significant, as such portfolios have the potential to generate positive externalities by reducing climate impact through lower emissions.

The impact of ESG on management tone: Empirical evidence from China

<p>This paper examines the effect and mechanism of ESG (Environmental, Social, and Governance) performance on management tone from the perspective of psychology and behavioral finance. The study found that ESG performance can significantly improve the enthusiasm of managers’ intonation, which is more obvious when the population density of the enterprise is higher. The mechanism analysis shows that the ESG performance of enterprises mainly affects the tone of managers through two channels: reducing financing constraints and improving financial performance. This paper examines the internal logic of ESG practice on managers’ emotional tendencies from the perspective of psychology and behavioral finance, and reveals that ESG practice does not make managers become negative.</p>

The value of a ‘just’ firm

PurposeThe study aims to investigate market reactions associated with the JUST 100 rankings published by JUST Capital, a non-profit organization, as well as differences in financial reporting quality and performance between selected firms and their industry peers.Design/methodology/approachThis study uses a sample of 431 firms selected as the 100 America’s Most Just Companies between 2016 and 2020 by JUST Capital. This study performs both an event study to determine whether the rankings are useful to investors and cross-sectional regression analyses on the characteristics of selected firms compared to their peers.FindingsThis study finds that investors react positively to selected firms around the time of the release of the JUST 100 rankings, suggesting that the rankings are decision-useful. This study also finds that selected firms exhibit higher accounting quality and financial performance than their peers.Research limitations/implicationsRankings may not be free from bias because of JUST Capital’s ownership of an exchange-traded fund.Social implicationsThe findings validate the rankings as well as the methodology used by JUST Capital, as they show market participants value firms that engage in socially responsible actions through their commitment to positively impact five key stakeholder groups: employees, customers, communities, environment and shareholders.Originality/valueTo the best of the authors’ knowledge, this is the first study that shows the importance of the JUST 100 rankings for investment decisions. Considering the growing push for companies to disclose environmental, social and governance (ESG) activities, this study provides evidence to support ESG disclosure regulations.

Women on Board and ESG Performance: Insights from the Italian Utilities Sector

The purpose of this paper is to investigate the relationship between gender diversity and environmental, social and governance (ESG) performance in the Italian utilities sector. The study examines whether the presence of women on the board of directors (BoD) is related to ESG dimensions. We analyzed a sample of 482 utility companies for the period 2018-2022 and we developed an econometric model applying unbalanced panel regression data with firm fixed effects and controls per year. Within a multivariate regression model, the authors considered the ESG score provided by Refinitiv Eikon to test the research hypotheses. Findings show that the presence of women on board of directors improves ESG performance when a critical mass of female board members (at least three) is reached. A critical threshold of female directors also positively influences the scoring of environmental and social pillars. From a managerial perspective this study draws attention to BoD composition encouraging utility companies to define internal corporate governance mechanisms thoroughly. The overall findings support managers, policy makers and regulators on how to improve ESG performance through gender diversity on BoD. This paper offers an in-depth examination of the ESG practices of utility firms, and it attempts to bridge the gap in prior literature on the determinants of ESG performance in the Italian utilities sector. This study is the first that investigates the relationship between board gender diversity and ESG performance in such a context exploring how a critical mass of women on BoD affects ESG dimensions.

The centrality of law for EU sustainable finance markets: Outlining a research agenda

AbstractThis article discusses how law shapes sustainable finance market creation in the European Union (EU). Although markets for environmental, social and governance (ESG) oriented investments have continued to grow, a gap has persisted between fund popularity and real‐world impact. The EU has sought to address this through common legal standards for sustainable economic activities. However, there has been limited empirical examination of how industry applies these new measures and how they facilitate further market development. The article seeks to address this by proposing a research agenda for the examination of sustainable finance legislation through a ‘law as constitutive’ lens. The approach argues for an empirical inquiry that recognises the political and social conditions of market development, explored through interviews with market participants focusing on their experiences of legislation. The article explains how a ‘law as constitutive’ framing best suits the EU context when exploring the potential and limitations of the current policy approach.

Study on the Relationship between ESG Performance and Corporate Performance in the Context of Dual Carbon - Based on the Perspective of Corporate Innovation

The relationship between environmental, social and governance (ESG) performance and corporate performance has received increasing attention under the dual-carbon goal. Taking corporate innovation capability as the analyzing perspective, this study explores the interaction mechanism between ESG performance, corporate innovation capability and corporate performance. By analyzing the data of listed companies in Shanghai and Shenzhen in the past ten years, this paper empirically examines the direct impact of ESG performance on corporate performance and the indirect impact through corporate innovation capability by using multiple regression model and mediation effect model. It is found that good ESG performance not only directly promotes corporate performance, but also indirectly improves corporate performance through enhancing corporate innovation capability. This finding demonstrates the importance of optimizing ESG performance and enhancing corporate innovation capacity to promote high-quality corporate development in a dual-carbon context. This study provides theoretical basis and practical guidance for enterprises to realize win-win situation of economic benefits and social responsibility while pursuing sustainable development.

Emerging market MNEs, digital transformation and ESG performance: evidence from China’s listed companies

ABSTRACT The importance of emerging market multinational enterprises’ (EM-MNEs) social responsibility has been realized in the literature, but how to enhance EM-MNEs’ ESG (Environmental, Social, and Governance) performance in the digital age has attracted limited attention. This article fills this gap by investigating whether EM-MNEs can improve ESG performance through digital transformation among Chinese listed companies. We employ text analysis techniques to measure the degree of digital transformation within MNEs and further construct a fixed-effects (FE) model to investigate the positive influence of digital transformation on EM-MNEs’ ESG performance. Results show that digital transformation within MNEs is positively related to ESG performance and such effect is verified for non-state-owned enterprises but not for state-owned enterprises. We suggest that MNEs with more foreign subsidiaries are more prone to be influenced by the positive effect of digital transformation on ESG performance than MNEs with fewer foreign subsidiaries. Moreover, the Belt and Road Initiative is valuable for MNEs to reap ESG benefits from digital transformation. The findings enrich international business studies by adding the digital economy and ESG to the discussion. Moreover, they provide valuable implications for policymakers and business leaders in emerging markets by delineating strategies for enhancing the ESG performance of EM-MNEs.

Performance of negatively screened sustainable investments during crisis

We investigate the market performance of negatively screened environment social and governance (ESG) portfolio or sustainable investments prior to and during crisis. A general and simple method is developed under the ESG Capital Asset Pricing Model (CAPM) framework for the assessment. The novelty is that this method can be employed when the parent portfolio is not a market portfolio. In this situation, both coefficients, alpha and beta, in the reduced form of regression have special interpretations and are informative. This paper examines 24 negatively screened ESG indices from the S&P, DJSI and MSCI data across various regions, firm sizes, and criteria of screening, for 2017 to 2021. Markov Switching Autoregressive (MSAR) model is adopted to identify the crisis regime. Our results show that the negatively screened ESG indices provide positive investors’ surpluses for ESG-motivated investors during the crisis, when the corresponding parent indices are the market portfolios. For ESG investments where market portfolios are not their parent indices, half of ESG indices under consideration still provide positive surplus with similar systematic risks as their parent indices during the crisis. The remaining ESG indices under-performs but has relatively lower systematic risks, implying resilience as compared to the corresponding parent indices during the crisis. Furthermore, we demonstrate the sensitivity analysis of treating a parent index as a market portfolio.

Unveiling the ESG-dividend nexus: the moderating role of investor protection and regulatory enforcement

PurposeThe mounting focus on environmental, social and governance (ESG) factors in business has sparked substantial curiosity in understanding the nexus between ESG and the companies’ strategic decisions. This study aims to investigate the influence of firms’ ESG disclosure scores on their dividend payout. Furthermore, it examines the nuanced dynamics of this relationship by exploring the moderating role of the country’s investor protection regulations and regulatory enforcement.Design/methodology/approachThis study uses pooled ordinary least square regression with year, industry and country effects. It analyzes a balanced panel data set of 192 non-financial firms drawn from the primary equity indices of BRICS nations. This study examined the data of six years spanning 2015–2020.FindingsThe findings discover a significantly positive relationship between ESG scores and dividend payout ratio, conveying that firms with higher ESG scores allocate more of their profits as dividends. Furthermore, the finding reveals that country-level robust investor protection and effective regulatory enforcement mechanisms undermine the positive association between ESG ratings and payouts of dividends, suggesting that the ESG disclosure of firms operating in a setting characterized by enhanced investor safeguards and stricter regulatory oversight will exert less influence on their dividend decisions.Originality/valueTo the best of the authors’ knowledge, this is the first study to concentrate on the ESG–dividend nexus in the BRICS countries. Furthermore, this study used each country’s investor protection index and regulatory enforcement scores to comprehend the influence of country-level legal frameworks in shaping the relationship between ESG and dividend decisions, thus adding value to the existing literature on corporate sustainability.