Environmental, Social And Governance Factors Research Articles

Investigating the integration of ESG factors into financial markets and its influence on sustainable economic growth in emerging Asian economies

It is increasingly obvious the huge improvement caused in loss of habitat and degradation in environment. Various nations are prone to natural disasters if this issue is not addressed. The development of finance has been hailed as significant in alleviating environmental concerns due to its part as a source of cash for the development of green technology. The primary goal of this research is to satisfy an acquaintance vacuum by investigating the relationship amongst economic growth and ESG (Environmental, Social and Governance) concert throughout Asia. This analysis made use of country-level data from 2010 to 2015. Economic growth is positively connected to ESG routine, due to examination upon the pooled normal least squares method, the immovable impact logistic method, these two-phase least squares technique, and the structure’s generalised approach of moments estimator. Additionally, additional tests including financial sector growth subcomponents (financial platforms and financial institutions) reveal that the conclusion is consistent and resilient under multiple model settings. Financial development, when combined, is an essential catalyst for promoting ESG performance in Asia.

ESG factors and the cross-section of expected stock returns: A LASSO-based approach

We analyze high-dimensional factor data in the U.S. market to examine whether the ESG (environmental, social, and governance) factors help explain the cross-section of expected stock returns. To avoid omitted variable biases, we use the double-selection LASSO approach with more than 160 risk factors. ESG and environmental factors potentially explain the cross-section of stock returns and can also affect investors’ marginal utility.

Identifying and Overcoming Obstacles to ESG Integration in Indian Companies: An Exploratory Study

This research paper aims to identify and overcome obstacles to ESG (Environmental, Social, and Governance) integration in Indian companies through an exploratory study. The study employs a qualitative research approach. Preliminary results suggest that Indian companies face several obstacles in integrating ESG factors into their decision-making processes, including a lack of awareness or understanding of ESG factors, limited availability of ESG data, weak regulatory frameworks, and cultural or institutional barriers. Potential solutions to these obstacles include increasing awareness through education and training, improving data quality and availability, strengthening regulatory frameworks, and building partnerships between companies and other stakeholders to promote ESG integration. The findings of this study have important implications for Indian companies, investors, regulators, and other stakeholders, by providing insights into the major obstacles to ESG integration in India and identifying strategies to overcome these obstacles

Microsoft's Business Model and Strategy Adjustment under ESG Standard

Environmental, Social and Governance (ESG) is an increasingly important consideration in investment and business operations. It covers corporate performance in environmental protection, social responsibility, and good governance. ESG factors can influence the long-term sustainability of a business, positively impacting shareholders, employees, customers, and society. Microsoft, as the world's leading technology company, is also actively paying attention to and practicing ESG principles. The company has undertaken initiatives aimed at reducing carbon emissions, promoting the use of renewable energy, and reducing waste of resources. At the same time, Microsoft is also working to promote diversity and inclusion to ensure equal rights and opportunities for employees. In terms of governance, the company has implemented a sound decision-making and oversight mechanism to ensure transparency and compliance in its business.

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.

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.

Navigating sustainability: Unveiling the interconnected dynamics of ESG factors and SDGs in BRICS‐11

AbstractIn this study, we investigate the impacts of ESG (environmental, social, and governance) factors on sustainable development goals (SDGs) for BRICS‐11 countries. The AMG, FMOLS, DOLS, and ARDL models are applied. While we found negative impacts of environmental factors (ENVf) on SDGs for Argentina, Ethiopia, and China, we found positive impacts of social factors (SOCf) on SDGs for South Africa and Argentina. Additionally, while we found positive impacts of governance factors (GOVNf) on SDGs for Ethiopia, Iran, and Saudi Arabia, we found negative impacts for the United Arab Emirates. No significant relationships were found between ENVf, SOCf, and GOVNf on SDGs for Brazil, Russia, India, and Egypt. These findings highlight the nuanced impacts of ESG factors on SDGs, providing valuable insights for policymakers and emphasizing the need for country‐specific sustainable development strategies. The negative environmental impact on SDGs in Argentina, Ethiopia, and China suggests that environmental degradation may hinder sustainable development, underscoring the importance of balancing economic growth and environmental sustainability. This result can also be interpreted through the Pollution Haven Hypothesis, which posits that developing countries may attract more foreign investments in pollution‐intensive industries due to their less stringent environmental regulations.

Forecasting ESG Stock Indices Using a Machine Learning Approach

As the demand for investment products tied to environmental, social and governance (ESG) concerns rises, ESG stock indices have been established. These indices aim to aid investors in navigating and assessing the risks associated with firms based on ESG factors and potential investment returns. The objective of the article is to predict ESG stock indices using a machine learning approach. We use daily data of Dow Jones Sustainability Index (DJSI) World, DJSI Asia Pacific and DJSI Emerging Market from 2018 to 2022 as samples. Two-layer ensemble model – combination of support vector machine (SVM), random forest (RF), long short-term memory (LSTM) and gated recurrent unit (GRU) algorithms – is employed to forecast the indices. The results show that the ensemble model accurately forecasts the indices, with the prediction line closely matching the actual values. It gives the implication that investors are able to improve investment decisions, assist in managing investment risk, and optimize their portfolio diversification. Meanwhile, policymakers are able to anticipate economic trends, inflation and interest rates, assisting in the development of successful economic policies. This research article presents a machine learning approach for predicting ESG stock indices. The proposed model combines SVM, RF, LSTM and GRU algorithms to create a powerful two-layer ensemble model that outperforms individual models. The results show that the ensemble model accurately forecasts ESG stock indices, with the prediction line closely matching the actual values. The model offers insights into the behaviour of different algorithms, highlighting their strengths and limitations. The proposed model can guide decision-making processes, support investment strategies, and ultimately contribute to advancing sustainable investment practices.

Beyond Size: How ESG Factors Shape Bank Value in India & China

Objective: This study examines the impact of ESG (environmental, social, and governance) factors on the market capitalization of banks in India and China. Specifically, it analyses the relationship between total assets, female board representation, social and environmental disclosures, and market capitalization.
 Methods: A comparative analysis of leading banks in India and China is conducted using 10 year (2013–2023) data using structural equation modelling (SEM) on market capitalization, total assets, ESG disclosures, and female board representation.
 Results: A positive and significant relationship is found between total assets and market capitalization in both India and China, indicating that investors value larger banks. In India, female board representation doesn't significantly impact market capitalization, while in China, a higher proportion may lead to lower market capitalization, requiring further research. A positive and significant relationship is found between social and environmental disclosures and market capitalization in both countries. However, the effect is stronger in India, indicating that Indian investors place greater value on banks with robust sustainability practices.
 Conclusions: This study highlights the growing importance of ESG factors in the banking sector, with varying degrees of emphasis depending on the country. While both Indian and Chinese investors value larger banks, Indian investors seem to place more weight on female board representation and social-environmental disclosures, while Chinese investors appear to prioritize other factors. Further research is needed to explore the underlying reasons for these differences and the complex interplay between various ESG factors and market performance.

The impact of environmental innovation and national culture on ESG practices: a study of Latin American companies

PurposeThis paper aims to examine how environmental, social and governance (ESG) practices are influenced by environmental innovations and how cultural dimensions moderate this interaction in Latin American companies.Design/methodology/approachIn this paper 157 companies from 6 Latin American countries were studied between 2010 and 2021, with a total of 1,204 observations. Data were collected from Refinitiv Eikon®, and results were generated using ordinary least squares regression, with country and year as controls.FindingsESG performance is higher in companies that invest in environmental innovation; innovation positively affects individual ESG factors; and masculinity, individualism, indulgence and power distance positively or negatively moderate the relationship between innovation and ESG performance, as well as environmental and social dimensions.Research limitations/implicationsOur findings contribute to the body of knowledge on sustainable practices in different cultures. We draw the attention of standard setters to the impact of innovation and culture on ESG practices in different countries.Practical implicationsBetter understanding of how environmental innovation can mitigate inequality, poverty and environmental issues in Latin America, promoting equitable development and environmental preservation.Social implicationsLatin American countries show significant levels of poverty, social and productive heterogeneity, and deficiencies in sustainable practices. Therefore, providing information on innovation as an incentive for better sustainable policies can promote these practices.Originality/valueOur study fills a gap by examining the specific influence of environmental innovation on ESG performance, particularly through its interactions with cultural dimensions, in a sample of Latin American firms.

ESG reputational risk and market valuation: Evidence from the European banking industry

This study examines the potential bidirectional linkage between reputational risk exposure associated with Environmental, Social and Governance (ESG) factors and market valuation in the banking sector. We build a monthly panel dataset for 19 European listed banks from 2012 to 2020. We employ a Bayesian Panel Vector Autoregressive model to examine the dynamics between the two variables of interest. The findings show an inverse bidirectional causality between ESG reputational risk exposure and banks’ market valuation and suggests that the impact of ESG reputational risk shocks on market valuation is more significant for high-exposed banks. Our results are consistent with the stakeholder and slack resources theories and highlight the importance of ESG factors in influencing the banks’ market valuation. Moreover, the study demonstrates how prior financial performances impact the ESG reputational exposure. These insights provide guidance on how banks can manage their ESG risks to enhance brand identity and market value.

Sustainable prosperity: unravelling the Nordic nexus of ESG, financial performance, and corporate governance

Purpose In the swiftly evolving business landscape, environmental, social and governance (ESG) considerations have gained exceptional prominence, as stakeholders increasingly emphasize accountability and sustainability. This study aims to meticulously probe the intricate interplay between ESG factors, financial performance and the distinct corporate governance landscape that characterizes the Nordic region's crucible of proactive societal and environmental commitment. Design/methodology/approach The authors begin with a data set of 899 Nordic firms across Sweden, Norway, Denmark, Finland and Iceland. Using the Thomson Reuters database, they refine this data set by excluding non-regional headquarters and entities without ESG scores or year-long financial data. This resulted in a focused data set of 1,360 firm-years spanning a decade, forming the foundation for investigating the link between ESG factors and financial performance in Nordic firms. Findings Drawing upon empirical data, the authors systematically dissect the correlation between specified financial ratios and ESG scores on the bedrock of sustainability evaluation. The findings underscore a partially significant, yet robust relationship between ESG endeavors and financial performance metrics. Furthermore, the intricate interplay of corporate governance dimensions’ reveals intriguing correlations with financial indicators among the surveyed Nordic enterprises. However, the findings also reveal an intricate weave that underscores the ESG and financial performance nexus. Research limitations/implications This study addresses stakeholders’ theory and unique positions and contributes to the current discussion on sustainability reporting literature by providing empirical evidence of ESG influences on firm profitability through board characteristics in the specific context of the Nordic region. The sample for this study encompasses firms listed in Nordic countries; thus, the results may not be generalizable to unlisted firms and other countries or regions. Practical implications This study suggests that Nordic firms are advanced in reporting ESG in response to diverse stakeholder demands as part of their regular activities. This study provides valuable insights for diverse stakeholders including researchers and regulatory bodies. Social implications This study provides an understanding of stakeholders about the association of ESG and sustainability practices with firm profitability, which might lead to making the world a better place. Originality/value While illuminating the multifaceted ESG-financial performance nexus, this study reveals its intricate nature. This complexity accentuates the compelling need for further exploration to decode the exact outcomes and myriad factors contributing to the array of correlations observed. Through this comprehensive inquiry, this research advances the understanding and underscores the pivotal role of a focused investigation. This study seeks to harmonize ESG practices and financial performance seamlessly within the Nordic business realm.

ESG and FinTech: Are they connected?

Due to the growing focus of institutional investors on sustainability, investment decisions in the financial sector are increasingly focused on environmental, social and governance (ESG) aspects. In this scenario, together with technological progress, sustainable finance, unlike traditional finance, directs capital towards operations that generate positive impacts for the environment and society. FinTech, considered an accelerator of sustainable economic growth, is part of the technological innovations related to sustainable finance. Through the analysis of an exploratory case study of international importance, represented by the bank BNP Paribas, this article uses the unified theory of acceptance and use of technology (UTAUT) to investigate the factors that influence technological innovation in the banking sector. The results show that social influence, reinforced by ESG factors, is a variable that encourages technology adoption in the banking sector. Collaborations with FinTech companies support banks in achieving sustainability objectives more efficiently. This study makes an important contribution to the academic literature. It expands knowledge on the determinants of financial technology diffusion by analysing the effect of ESG factors not considered in previous literature. The study also presents practical implications for banks and policy makers. It is appropriate for banks to plan training activities for managers and employees on FinTech to promote understanding of these subjects and facilitate better institutionalization of sustainability practices.

The Impact of ESG (Environmental, Social, and Governance) Factors and Eco-Friendly Trends on the Beauty Industry: A Big Data Analysis of the Past Year

This study examines the impact of eco-friendly trends and Environmental, Social, and Governance(ESG) factors in the beauty industry. Recognizing the significance of eco-friendly trends and ESG in the sector, the research aims to achieve its objectives by extracting key keywords using big data and analyzing them through social network analysis. The data utilized for this study covers the period from June 1, 2022, to May 31, 2023. The findings of this research reveal that both eco-friendly trends and ESG have a substantial influence on the beauty industry as a whole. Firstly, eco-friendly trends have brought about changes in beauty product development and production methods. Increased consumer environmental consciousness has led to a higher demand for natural ingredients, renewable materials, and recyclable packaging. As a result, numerous beauty brands are launching eco-friendly product lines and adopting environmentally sustainable production practices, promoting these initiatives in their actual beauty products. Secondly, ESG factors significantly impact the business operations and sustainability of beauty industry companies. Companies that demonstrate outstanding performance in environmental, social responsibility, and governance aspects are more likely to gain greater trust and support from consumers and investors. Complying with social values, ethical principles such as opposing animal testing, ensuring product safety, fair trade, diversity, and inclusivity, enhances companies' competitiveness. Lastly, this research finds that eco-friendly trends and ESG not only affect the beauty industry itself but also influence investment decisions. ESG evaluations assist investors in assessing a company's long-term value creation capability and risk management. Business strategies that consider ESG factors have the potential to attract investor interest. It is important to note that this study is based on current trends and data, but the beauty industry is continuously and rapidly evolving. Ongoing updates to research findings and further investigations into new trends are necessary.

Integrating ESG Metrics into Business Operations: A Comprehensive Methodology for Payment Services

This research paper introduces an innovative methodology designed for the seamless incorporation of Environmental, Social and Governance (ESG) metrics into the operational framework of payment services companies. Recognizing the complexities and multidimensional nature of ESG integration, this study meticulously identifies critical ESG factors that hold particular significance for payment processing entities. It goes further to elaborate on a sophisticated framework meticulously crafted not only to assess but also to substantially elevate ESG performance across diverse operational practices. The cornerstone of this methodology is its firm grounding in rigorous empirical data analysis, which illuminates the practicality and transformative potential of the proposed approach. Through a detailed exploration of ESG factors, this paper illuminate’s pathways for payment services companies to foster more sustainable business operations, highlighting the pivotal role of ESG metrics in driving operational excellence and sustainability in tandem. The findings underscore the substantial impact that a strategic ESG metrics integration can have, presenting a compelling case for its adoption as a cornerstone for sustainable and responsible business practice in the digital payment sector.

Can Warren Buffetts Investment Decisions Independent of ESG? Evidence from Berkshire Hathaway

The past decade has witnessed a growing recognition of ESG (Environmental, Social, and Governance) investing, yet the application of ESG principles within Berkshire Hathaway, under the leadership of renowned investor Warren Buffett, has not been prominently evident. This study seeks to ascertain whether the historical investment decisions made by Buffett's Berkshire Hathaway, seemingly disassociated from active ESG involvement, may have nonetheless been subject to the influence of ESG factors. Employing methodologies encompassing correlation and regression analyses, this research unveils a discernible positive relationship between Berkshire Hathaway's investment quantities and the ESG scores of the invested firms. Moreover, companies demonstrating a positive trajectory in ESG considerations tend to be more aptly enlisted in the subsequent year's investment roster, while those witnessing a decline in ESG scores are prone to exclusion. In a comparative exploration of financial variables and ESG metrics, this study chose profit margin, ultimately revealing that ESG scores exert a notably more pronounced impact on Berkshire Hathaway's investment deliberations, specifically pertaining to share quantities, in contrast to the effect exerted by profit margin.

ESG RISK MANAGEMENT: SOME OBSERVATIONS FROM AN ACADEMIC PERSPECTIVE

ESG risk refers to the potential risks associated with environmental, social and governance (ESG) factors in the decision-making process. ESG refers to a set of principles that guide a sustainable and responsible approach to investing. This means that ESG factors should be taken into account in investment decisions, where social and environmental impacts should be considered alongside financial aspects.

ESG criteria in green rebuilding of Ukraine

The historical retrospective of the construction industry shows a tendency to move to a qualitatively new level after crises and global upheaval. Global markets are currently being reformatted to reflect new investment priorities, where environmental, social and governance (ESG) criteria are gaining essential importance, and Ukraine is at the center of global transformations. Ukraine's post-war reconstruction plans include the use of green innovative technologies, as the formation of a green economy is the basis of the European Union Association Agreement. The concept of "green recovery" has become widespread, as investments in low-carbon technologies strengthen the country's resilience. Implementation of green building principles saves resources and energy, stimulates innovation and competitiveness, and increases the confidence of investors and increasingly conscious consumers. Current international trends are moving towards global decarbonization of the world economy and the widespread implementation of ESG non-financial reporting standards to screen and increase transparency of business. The construction sector plays a key role in achieving the Sustainable Development Goals, given the significant economic, environmental and social impacts of the construction industry. The requirements for decarbonization, safety and well-being of buildings are growing, and the increasing volume and complexity of data requires new tools and approaches. The application of ESG principles involves the creation of long-term sustainable value in the interests of the company and its stakeholders. In the construction sector, ESG factors are crucial for determining the overall value and potential of a property, which helps investors to obtain more information for decision-making and risk assessment. The use of (ESG) indicators ensures transparency, objectivity and measurability of the company's performance. Businesses that demonstrate concrete commitments to sustainable development will become undisputed leaders in their industries in the next 30 years and will gain access to investment capital. On the other hand, companies that do not take care of compliance with international standards in a timely manner risk losing business in the medium term.

ESG AND CORPORATE GOVERNANCE: A SYSTEMATIC REVIEW

In an era when organisations are under more significant pressure to balance operational effectiveness with ethical and environmental obligations, it is critical to comprehend the impact of environmental, social and governance (ESG) on corporate governance (CG). This review aims to synthesize the current body of literature, distinguishing significant themes, trends, and gaps to present a structured synthesis of this field. This research utilised the PRISMA framework. An advanced search strategy was performed using Scopus and Web of Science databases to retrieve the relevant studies and articles concerning ESG, corporate governance, and their interaction utilising the keyword (1. ESG 2. Board of Directors 3. Corporate Governance). The result unveiled the importance of ESG factors in influencing corporate strategies, policies, and the composition of boards as governing bodies. The final data findings consist of thirty papers identified through this review. The expected validation is comprised of the following three themes: (1) The significance of CG integration with ESG, (2) Framework for Research on ESG and CG, and (3) New research area on CG and ESG. The results highlight the necessity of incorporating CG on ESG principles as a foundation for a firm's sustainability and stakeholder trust. Furthermore, this assessment serves to identify gaps in knowledge, providing valuable insights for future research and policy implications.

Do private and public sector banks respond to ESG in the same way? Some evidences from India

PurposeThe banking industry faces increasing scrutiny from stakeholders regarding its environmental and social impacts, given its crucial role in fostering economic growth. Banks have been encouraged to adopt environmental, social and governance (ESG) practices to mitigate risks and safeguard their reputation. However, the effectiveness of ESG sensitivity within the banking industry is contingent upon ownership and structural factors. The extent to which banks can integrate ESG considerations into their operations and decision-making processes may vary based on their ownership structures. Therefore, this study aims to examine if the impact of ESG on the performance of Indian banks varies between private and public sector banks.Design/methodology/approachThe study employs six years of panel data from two separate samples of 12 private sector banks and 10 public sector banks in India. It utilises fixed and random effect estimation techniques with robust standard errors to derive accurate and reliable econometric results.FindingsThe main findings of this study reveal intriguing insights into the relationship between ESG factors and bank performance, considering the influence of ownership structure. For private sector banks, the ESG composite score, particularly the social dimension, negatively impacts financial performance. However, there is a contrasting positive effect on efficiency. In contrast, public sector banks demonstrate a positive and significant association between the environmental score and return on equity and non-performing assets.Practical implicationsThe findings highlight the need for tailored strategies that align with ownership structure to achieve sustainable financial and societal outcomes in the banking industry. Furthermore, it emphasises the need for private-sector banks to streamline their ESG initiatives, especially in the social dimension, to mitigate negative impacts on their financial performance.Originality/valueThis study introduces a novel dimension by addressing the “one size fits all” bias in prior research that overlooked bank ownership differences when examining the impact of ESG factors on bank performance.