Environmental, Social And Governance Disclosure Research Articles

Corporate governance and anti-corruption disclosure

PurposeIn recent years, the role of environmental, social and governance (ESG) disclosure has become crucial. The aim of this paper is to study how corporate governance affects one part of ESG disclosure: anti-corruption disclosure.Design/methodology/approachThis study examined 140 corporate social responsibility (CSR) reports from companies listed on the Italian stock markets and 50 CSR reports from other companies, then this study analysed the adoption of the Global Reporting Initiative (GRI) standard no. 205.FindingsThe results show a low level of disclosure, and that corporate governance issues matter. In particular, the analysis found a positive relationship between the presence of female and outside members, the number of board members and the level of anti-corruption disclosure.Research limitations/implicationsThis study acknowledges some limitations. Firstly, the research is based on a one-year sample. Secondly, the research hypotheses are confirmed only when considered in relation to a single section of the GRI standards. Thirdly, this study has a bias towards relatively large enterprises.Practical implicationsIt could be worthwhile introducing a soft regulation regarding the composition of the board of directors that requires a certain quantitative and qualitative composition.Originality/valueTo the best of the authors’ knowledge, this is one of the few studies, the first in Italy, that sheds light on anti-corruption disclosure and its determinants.

Disparities in ESG reporting by emerging Chinese enterprises: evidence from a global financial center

PurposeThis study aims to examine the potential disparities in environmental, social and governance (ESG) reporting among emerging Chinese enterprises (ECEs). ECEs are subject to a set of internationally oriented ESG requirements imposed by the regulator of a global financial center that is exposed to diverse stakeholders. The authors also consider ECEs’ underlying institutional ownership, which exhibits influence over governance as a salient component of ESG.Design/methodology/approachThis study is based on a random sample of 500 ECEs listed on the Stock Exchange of Hong Kong (SEHK) – the global financial center of China. ESG reporting is measured by using the key performance indicators of the SEHK’s ESG Reporting Guide. The data are collected from annual reports that contain ESG disclosures or standalone ESG/sustainability reports published during the 2018–2019 fiscal year. The authors adopt binary logistic regressions and Chi-square tests to test the proposed hypotheses.FindingsThe authors find that ECEs’ heterogeneous institutional ownership and the extent of overseas development are associated with their disclosures on climate change. ECEs with international institutional ownership are found to be a significant factor for reporting aligned with the United Nations sustainable development goals (SDGs), using external assurance and stakeholder engagement, rather than state-owned enterprises (SOEs) and private companies. The authors also document that the presence of independent nonexecutive directors (INEDs) is significantly associated with reporting on meeting the SDGs and its use of external assurance, while the presence of female directors is a significant factor influencing disclosure emphasis on energy-saving initiatives.Practical implicationsThe authors provide an empirical study of ECEs beyond the focus on SOEs that are expected to produce comprehensive ESG reporting in addressing a broader international community of stakeholders apart from the regime of their home country. The authors document the pertinence of ECEs’ institutional ownership and governance diversity to ESG reporting. In particular, international stakeholders need to recognize such underlying differences among ECEs rather than viewing them as a homogeneous group.Social implicationsThe authors suggest that policymakers and practitioners in Asian countries consider increasing the presence of INEDs and gender diversity on ECE boards to enhance ESG reporting, which reinforces the findings of prior international studies suggesting such governance practices.Originality/valueThis study contributes to the existing body of knowledge about ESG reporting by documenting the underlying heterogeneity within ECEs, which are subject to a set of internationally oriented standards, as evidenced by their disparities in ESG reporting.

Is water management really transparent? A comparative analysis of ESG reporting of Andalusian publicly-owned enterprises

IMPACT This article reveals a low commitment of Andalusian publicly-owned enterprises with environmental, social and governance (ESG) reporting. The results will be useful for practitioners in public water utilities and other GOEs to improve their level of disclosures. The authors stress that managers need to be trained with the skills necessary to provide a better level of ESG disclosure. In addition, managers, along with regulators and policy-makers, need to work together to introduce realistic forcing mechanisms in current and future regulations to enhance their compliance with mandatory ESG reporting requirements.

Gender Diversity and Environmental, Social and Governance (ESG) of Malaysian Listed Companies

The paper is a review of literature on gender diversity and the environmental, social, and governance (ESG) performance of the public listed companies in Malaysia. Further knowledge on recent developments in this research area is explored in this paper. This study employed a structured review process that critically examined the contents to ensure that the data are filtered from high-quality peer-reviewed journals. Quality papers were selected from top journals to produce the list and organize into five sections; introduction, the ESG Disclosures, gender diversity, and finally on gender diversity and ESG. This study will be beneficial to academics, policymakers, and government authorities who dealt with the ESG disclosure and Women's participation as directors in Malaysian public listed companies

On the drivers of sustainable development: empirical evidence from developed and emerging markets

ABSTRACT Why do firms’ sustainability disclosure performance differ so much between firms and across countries? Which factors drive firm’s awareness of sustainable development and do these factors have different driving mechanisms between developed and emerging countries? We answer these questions using a panel data regression model on around 1500 companies from 20 developed countries and 20 emerging countries during the period from 2009 to 2019. Our empirical results reveal that both firm-level and country-level variables are important predictors for sustainable disclosure performance. In developed countries, most firm-level indicators show a significant and positive effect on Environmental, Social and Governance (ESG) disclosure scores. In emerging countries, only operating performance, measured by total revenues, and firm size have a positive impact on ESG disclosure, while high level of profitability is associated with low ESG score. On the country level, we find a significant relationship between all drivers and ESG scores in developed countries. However, in emerging markets, only economic, cultural (excepting uncertainty avoidance index) and technological factors are shown to impact significantly sustainable development.

Environmental, Social and Governance (ESG) Report Quality and Firm Value in Southeast Asia

This study examines the impact between the Environmental, Social, and Governance (ESG) score and firm value described by market capitalization from the perspective of legitimacy theory. This study focuses on ESG disclosures from 608 companies in Southeast Asia for 5 years. This study tested three dimensions of the ESG Score (environmental, social, and governance pillar score) that most affect the value of the company. ESG Score is measured from the Thomson Reuters Eikon Refinitiv matrix and analyzed with multiple regression analysis. This research shows that ESG disclosure positively affects firm value. This finding shows that every ESG score increase affects the increase in market capitalization. Furthermore, the social score is the most affected by firm value. This study adds to ESG literature by examining three components of ESG score. Previous research focused on each component of ESG. This research uses three components of ESG and its relationship to firm value to examine which component has a strong effect on market capitalization.

The Impact of Sustainability Disclosures on Value of Companies Following Digital Transformation Strategies

Sustainable growth is the key global priority, and environmental, social and governance (ESG) objectives have become the main point of attention in companies’ digital transformation strategies. ESG and digital transformation reinforce each other as they aim to improve efficiency and meet stakeholders inside and outside the company. This is true for telecommunication companies, where disruptive technologies such as artificial intelligence, big data or cloud computing are reshaping the industry. Assessment of the impact of sustainability disclosures on companies’ value is a task of high interest for academics and practitioners from telecommunication companies. ESG disclosure serves as a key channel to inform investors about the efficiency of ESG risk management and control practices of the firm and thus can impact the firm’s financial performance and market value. However, there are numerous controversies in the academic literature on this topic and a lack of research specifically for the telecommunication industry. We closed the research gaps and investigated the impact of ESG disclosure on Tobin-Q of 93 US-listed telecommunication service companies between 2011-2021. We found that aggregated ESG disclosure score positively impacted telecoms’ Tobin-Q. Among individual ESG disclosure pillars, only corporate governance positively influenced Tobin-Q, while the impact of environmental and social pillars was statistically insignificant. We also found that CEO duality significantly and negatively impacted Tobin-Q. The presence of the corporate social responsibility (CSR) committee, greater gender diversity and a higher percentage of independent directors on the board positively affected the value of the telecoms. The result of the study can be applied in developing ESG rating methodologies for telecommunication companies. They can also assist telecom companies’ managers and stakeholders to identify key value drivers of the ESG agenda.

Environmental, Social and Governance (ESG) Disclosure and the Small and Medium Enterprises (SMEs) Sustainability Performance

This paper aims to evaluate the impact of environmental, social and governance (ESG) disclosure practices on the sustainability performance of small and medium enterprises (SMEs) in Saudi Arabia. It adopts qualitative research methods to answer the research questions through interviews, using a sample of 30 interviewees, to direct and moderate the relationship between SMEs’ sustainability performance and their disclosure of ESG practices. The results indicated that SMEs in Saudi Arabia lack awareness of ESG practices and disclosures and, therefore, the extent of their importance to sustainability performance. The findings of this research have several practical implications for different stakeholders, internally and externally, such as managers, consultants, investors, credit agencies, lenders, policymakers, government, and the overall community in the context of the potential effects of ESG disclosure practices on SMEs.

Declaration of the Sustainable Development Goals of Mining Companies and the Effect of Their Activities in Selected Areas

The article addresses the issues of sustainable development in relation to a selected group of mining companies. The main objective of the article was to verify the companies’ declarations on the convergence of sustainable development goals (SDGs) and the assessment of their actual actions. In order to achieve this objective, the authors hypothesized and adopted, among others, a multi-stage logical thinking-based methodology. In addition, several research methods were used, i.e., a review of regulations and scientific articles, a qualitative literature review—extracting and collecting information, developing a categorization framework, and a comparative method based on a case study. The study started with extracting and collecting social and environmental information disclosed by Polish mining companies at the level of declaring SDGs targets (KGHM, LW Bogdanka, and JSW). Sourced from reports and company statements. In the next step, a leader (KGHM) was selected, and a comparison was made with a global enterprise (Barrick Gold), according to the adopted categorization framework for social initiatives. Common areas of both SDGs declarations and actions for these entities were identified, and measures of their implementation were suggested. Two main metrics were proposed for the social area, i.e., health and safety in relation to the financial performance of the companies and diversity in management and supervisory bodies. The role and importance of the prioritization of ESG (environmental, social, and governance) disclosures by the industry players are indicated.

Mainstreaming environmental, social and governance integration in investment practices in South Africa: A proposed framework

Orientation: Responsible investment (RI) is gaining prominence globally. As South African asset managers increasingly apply environmental, social and governance (ESG) criteria, they require improved guidance on the integration thereof in mainstream investment practices.Research purpose: A best-practice framework for ESG integration is proposed based on empirical results and international standards.Motivation for the study: The mainstreaming of ESG is examined in South Africa, a country where integrated disclosure by listed companies is well established and asset managers are challenged to meet international standards while facing emerging market realities.Research approach/design and method: Selected South African asset managers completed a questionnaire and semi-structured interviews were conducted with national and international asset managers to gauge their views on ESG integration best practices.Main findings: The findings highlight the limited local opportunity set and scope to increase client demand for RI in South Africa. Inconsistencies were noted in how the local asset managers incorporated material ESG information in their investment policies and practices.Practical/managerial implications: ESG integration should form part of the entire investment process. To effectively apply the proposed ESG framework, Investment managers should formalise and publish comprehensive RI policies and develop internal ESG data provision systems covering material subjects defined by international ESG disclosure standards. Invest managers are encouraged to conduct ongoing engagement with investee companies on key ESG issues.Contribution: While the need for ESG integration is recognised, local asset managers require improved guidance on the incorporation of complex ESG issues. A best-practice framework for ESG integration is hence proposed.

Environmental, social and governance disclosure’s impacts on earnings management: Family versus non-family firms

Firms may strategically disclose corporate social responsibility (CSR) activities to compensate for their earnings management practices and, in this way, deflect stakeholders' attention from non-standard reporting procedures. However, CSR dimensions can contribute differently to these practices, and these impacts may be affected by specific business contexts. This study investigated how each component of environmental, social and governance (ESG) disclosure individually affects earnings management in family versus non-family firms. The analysis used data from 2009 to 2018 on listed companies in France and Spain as these code law countries both have concentrated ownership. The results show that not all ESG dimensions are equally important for reducing earnings management and that the relationship between ESG disclosure and earnings management is affected by firms’ family or non-family status. The findings contribute to resolving the debate generated by inconsistent results reported regarding the relationship between disclosure of CSR activities and earnings management.

Stock market reaction to mandatory ESG disclosure

Employing an event-study approach, we examine stock market reaction to the enactment of the Environmental, Social and Governance (ESG) Disclosure Simplification Act of 2021 by the United States House of Representatives. The Act mandates disclosure of standardized ESG metrics among American public companies. A significantly negative reaction of -1.1% is documented across all firms, which does not recover until the fifth day. Carbon-intensive firms and industries are more vulnerable to the negative market reaction. The negative reaction attenuates among firms with higher ESG scores.

Random Walk of Socially Responsible Investment in Emerging Market

Emerging markets offer some of the world’s most impactful investment possibilities for investors concerned with addressing global climate and socioeconomic issues. Sophisticated investors conjectured that socially responsible investment (SRI) or environmental social and governance (ESG) might give greater returns than investing in conventional stocks in an emerging market. At the same time, the investors favour conserving the environment while generating long-term economic growth. Being able to earn greater returns is an indication of an inefficient market. This paper investigates the random walk (weak-form of the efficient market) of SRI/ESG indices in the emerging market (based on IMF emerging market criteria). We use the daily data as a sample. Random walk is tested using an Augmented Dickey–Fuller (ADF) Unit Root test, Variance ratio test and Hurst exponent test. The findings report that all the indices are not following a random walk. Lack of ESG disclosure, inadequate corporate governance regulation and behavioural bias might be reasons for market inefficiency. Its implications for investors to reap abnormal market returns by identifying the undervalued stock in the emerging economies. The regulator’s approval of operational guidelines and the licensing of exchanges and clearing houses help maintain the markets’ fairness. Then, the regulator should intensify corporate governance enhancement, implementation and enforcement continuously; enhance the market and institutional infrastructure, and focus policy on encouraging a more significant and more diverse investor base.

The Effect of Gender Diversity in The Boardroom and Company Growth on Environmental, Social, and Governance Disclosure (ESGD)

Research aims: This study aims to obtain empirical evidence regarding gender diversity in the boardroom on ESGD (environmental, social, and governance disclosures). In this case, an entity should not only be profit-oriented but rather carry out a form of corporate social responsibility so that the company's sustainability is considered a form of decision-making.Design/Methodology/Approach: The sample was companies listed on the Indonesia Stock Exchange for 2010-2018. The data obtained were based on the annual and sustainability reports. This study used a quantitative approach with multiple linear analyses, with the help of the Software STATA 15 program as hypothesis testing.Research findings: The results uncovered that gender diversity in the boardroom had a significant and positive effect on environmental, social, and governance disclosures, and company growth strengthened their relationship.Theoretical contribution/Originality: This study attempts to see how the company's growth in building CSR in companies with board diversity. In addition, the results of this study are a discussion of and in line with the theory of legitimacy, upper echelons, and stakeholders.Practitioner/Policy implication: The practical contribution of this study is that the placement of people with gender diversity on the board is crucial. When the company recruits a woman to its board, its ESGD level will change. Research limitation/Implication: This study was limited to the value of overall disclosure, so it is hoped that future researchers can categorize each environmental, social, and governance indicator more broadly.

Too little or too much? Exploring the inverted U-shaped nexus between voluntary environmental, social and governance and corporate financial performance

This study aims to examine the nonlinear relationship between environmental, social and governance (ESG) and corporate financial performance (CFP) using Taiwan Stock Exchange (TSE) listed firms with ESG disclosure between 2005 and 2019. The pooled ordinary least square (OLS) regression estimation results indicate the ESG-CFP nexus is a nonlinear (inverted U-shaped pattern). Furthermore, the individual ESG pillars each have a different relationship with CFP. Both the environmental and social pillars have an inverted U-shaped relationship with CFP, whereas there is no significant relationship between the governance pillar and CFP. The concave nonlinear relationship also supports the tenets of the “too-much-of-a-good-thing” effect. This research confirms that TSE listed firms should identify the optimal ESG value (threshold point), where ESG costs and benefits balance, to maintain sustainable development and stakeholder engagement.

ESG and systemic risk

ABSTRACT How do changes in Environmental, Social and Governance (ESG) scores influence banks’ systemic risk contribution? Using a dynamic panel model, we document a beneficial impact of the ESG Combined Score and Governance pillar on banks’ contribution to system-wide distress analysing a panel of 367 publicly listed banks from 47 countries over the period 2007–2020. Stakeholder theory and theory relating social performance to expected returns in which enhanced investments in corporate social responsibility mitigate bank-specific risks explain our findings. However, only better corporate governance represents a tool in reducing bank interconnectedness and maintaining financial stability. The results are robust to alternative measures of systemic risk, both contribution and exposure, as well as when estimating a static model. Our findings stress the importance of integrating banks’ ESG disclosure into regulatory authorities’ supervisory mechanisms as qualitative information.

Environmental, social and governance (ESG) disclosure and firm performance: does national culture matter?

PurposeThe purpose of this study is to analyze the extent to which culture may affect the relationship between environmental, social and governance disclosure (ESGD) and firm performance (FP).Design/methodology/approachData for testing the hypotheses are collected from 668 firms in the energy sector worldwide over a period of eight years from 2009 to 2016. The analysis is carried out using the instrumental variables regression technique to account for endogeneity. Hofstede’s cultural dimensions of power distance (PD), masculinity (MASC), long-term orientation (LTO), uncertainty avoidance (UNCAVOID) and individualism (INDV) are used as proxies for culture.FindingsThe results show that ESGD has a significant negative impact on the profitability of energy firms. When cultural dimensions are taken into account, PD and LTO are found to significantly moderate the relationship between ESGD and FP, whereas MASC, UNCAVOID and INDV have no significant effect on the relationship between ESGD and FP.Practical implicationsThe findings of this study highlight the need for regulators to consider the importance of cultural dimensions when seeking to develop a single global standard for ESGD. In addition, regulators need to weigh both the costs and benefits of developing a global standard for it to be effective and acceptable.Social implicationsThis study emphasizes the need to take into account the cultural orientation of the society in which firms operate when devising strategies to fulfill societal expectations and achieve business goals.Originality/valueTo the best of the authors’ knowledge, this is the first study that addresses the role of culture in affecting the impact of ESGD on FP.

Interactive effects of brand reputation and ESG on green bond issues: A sustainable development perspective

AbstractThis paper shows that brand reputation alone may not be sufficient to help firms successfully issue green bonds and that they may need superior corporate social responsibility performance in the form of high ESG (Environmental, Social, and Governance) scores to unlock the full potential of their brand reputation. Using a sample of 338 international green bond issues across 108 unique firms, we found significant positive effects of ESG disclosure score and its interaction brand reputation on the issuance of green bonds while controlling for other variables, such as fixed effects of industry, region, and time. We also show that it is the S (Social) component of ESG and the interactions of its E (Environmental) and G (Governance) components with brand reputation which drive successful green bond issuance. Besides extending the current research on the impact of brand reputation and ESG on green bonds, these results also have important managerial implications for analysts, fund managers, and firms planning to raise green capital.

Women on boards, firms’ competitive advantage and its effect on ESG disclosure in Malaysia

Purpose The purpose of this paper is to investigate the effects of women on board moderated by firms’ competitive advantage on firms’ environmental, social and governance (ESG) disclosures. Design/methodology/approach The sample consists of 332 firm-year observations from the year 2012 to 2017 of 65 firms listed in Bursa Malaysia. To improve the robustness of this analysis, the authors adopt clustering techniques in the regression analysis. Sensitivity analysis is also conducted using two-stage least square regression and robust standard errors for panel regression with a cross-sectional dependence approach. Findings The findings of this research indicate that women on board encourage ESG and environmental disclosures. Nonetheless, in competitively advantaged firms, the authors find that the interaction between WOMENPER and COMADVANTAGE is negatively influencing ESG scores. However, no evidence is found to indicate that women on board in a competitively advantaged firm have an effect on the environmental scores of a firm. Research limitations/implications The findings urge regulators to ensure the appointment of qualified and competent women on board, particularly in competitively advantage firms. Practical implications Though firms with more women on board are associated with better ESG disclosures and environmental disclosures, the author’s additional analysis found that this is less pronounced in competitively advantage firms. Since a number of the competitive firms are owned by family firms as well as government-linked firms, the appointment of women should not be based on directors’ affiliation, network and family relationships. Originality/value To the best of authors’ knowledge, this is one of the few studies which seek to investigate women’s appointment in competitive advantage firms.

The link between corporate social responsibility and financial performance in Taiwan: A non-linear approach

<p>This paper examines the relationship between Corporate Social Performance (CSP) and Corporate Financial Performance (CFP) of 286 Taiwan-listed firms during the period 2012- 2017. I use Bloomberg’s Environmental, Social and Governance (ESG) Disclosure score to proxy CSP. The CFP is measured by two accounting-based measures, namely, Return on Assets (ROA), Return on Equity (ROE), and a market-based measure as annual stock returns (Stock Returns). Results suggest that CSP influences on ROE and ROA in an inverted U-shaped pattern, supporting that the strategic CSR motive satisfies the profit maximization assumption; better current ROE (Stock Returns) will lead to subsequent CSP improvement in a positive quadratic (inverted U-shape) pattern, thus supporting the slack resources theory. To sum up, there is a quadratic bidirectional relationship between CSP and ROE of Taiwan-listed firms. </p> <p> Further, disentangling Bloomberg’s ESG Disclosure score to proxy environmental, social, and governance performance, which shows that the direct effect of environmental (social) performance on accounting-based measures of CFP is increasing (decreasing) return to scale. Hence, the Environmental Corporate Social Responsibility (ECSR) investment by TWSE listed firms benefits CFP should be encouraged in cases where the indirect influence of environmental performance on ROE and ROA through governance performance is manageable, supporting Natural-resource-based View of the firm (NRBV).</p> <p> </p>