Environmental Social Governance Disclosure Research Articles

ESG disclosure standards: international and chinese case studies

This study is dedicated to revealing the implications of international ESG (Environmental, Social, Governance) disclosure standards and practices for China. The research task is to systematically sort out and analyze the current mainstream international ESG standards and their latest developments. At the same time, combined with China’s ESG disclosure policies and practices, it provides helpful references for formulating ESG disclosure standards and frameworks with Chinese characteristics. This paper is based on processing secondary data obtained through qualitative analysis of relevant literature and official government documents (plans, strategies, reports, and programs). The paper suggests that the current Chinese government needs to (1) formulate an ESG disclosure standard system with Chinese characteristics; (2) guide ESG market entities to jointly participate in the formulation and development of the ESG standard system; (3) create a mandatory ESG disclosure system.

The veil of secrecy: Family firms’ approach to ESG transparency and the role of institutional investors

Our analysis explores the relationship between family ownership and ESG (Environmental, Social, Governance) transparency in Italian companies from 2016–2020, employing agency theory, stakeholder theory, and Socio Emotional Wealth (SEW). We find that family-owned firms typically exhibit lower ESG transparency, especially in social aspects, due to priorities like privacy and legacy. Institutional investors (IIs), however, play a crucial role in enhancing transparency, mitigating the usual opacity in these firms. This highlights the importance of IIs in advancing ESG disclosures, providing strategic insights for addressing the transparency challenges associated with family ownership and improving governance practices to narrow the corporate transparency gap.

Impact of environmental, social and governance initiatives on firm value: Analysis using AI-based ESG scores for Japanese listed firms

This paper is the first study to examine the relationship between ESG initiatives and firm value for almost all Japanese listed firms. By constructing our unique AI-based ESG (Environmental Social Governance) scores that have higher coverage than existing ESG scores, we score and analyze firms that have not previously been given ESG scores and provide more robust evidence for the impact of ESG initiatives on firm value. Our unique AI-based ESG scores are classified as ESG disclosure scores. We empirically show that Japanese listed firms engaging in ESG activities have a significantly higher Tobin’s Q and higher volatility. We use the COVID-19 pandemic to eliminate reverse causality in our analysis.

Do or Don’t: Focus on Critical Issues of Environmental Social Governance Disclosure in Singapore, Malaysia, and Indonesia

Environmental Social Governance (ESG) refers to a collection of corporate performance evaluation criteria that assess the robustness of corporate governance mechanisms and their ability to effectively manage their environmental and social impacts. This study aims to determine whether the variables of influence of industry type, profit quality, managerial ownership, and foreign ownership have a simultaneous or partial effect on ESG disclosures in consumer cyclical sector companies listed on the Stock Exchange of several countries in Singapore, Malaysia, and Indonesia for the 2020-2022 period as many as 23 companies. Data testing techniques use classical assumption tests, multiple linear regression tests, determination tests, and hypothesis tests. The results showed that simultaneously, the variables of the industry type, profit quality, managerial ownership, and foreign ownership significantly influenced ESG disclosures in consumer cyclical sector companies listed on the Stock Exchange of several countries in Singapore, Malaysia, and Indonesia for the 2020-2022 period. The industry type variable partially does not affect ESG disclosure, and the profit quality variable does not affect ESG disclosure. In contrast, the managerial ownership and foreign ownership variables affect ESG disclosure.

The Impacts of Banks Financial Performance on Environmental Social Governance Disclosures: The Case of Asean Banks

This document's goal is to investigate the bank's kinerja keuangan dampak in the ESG. This study compares 47 banks in ASEAN between 2018 and 2022. There are eight banks in ASEAN that have implemented ESG, including those in Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam. The independent variables are the liquidity, capital ratio, and quality asset. The variable depends on the ESG score. We are using Total Assets and ROA as control variables. In this study, we used a panel regression model to analyze the impact of bank lending practices on ESG in ASEAN bank-to-bank lending. There are two types of control variables used in this study: ROA and Total Aset. Aset quality does not negatively impact ESG; on the other hand, modalities have a negative impact on ESG and a positive impact on ESG. The use of ROA as a control variable indicates that aset quality has no effect on ESG, modal ratio has a negative effect on ESG, likuiditas has a positive effect on ESG, and ROA has no effect on ESG. Conversely, Total Assets is the control variable. Asset quality does not have an ESG dampening effect, modalitas has a negative ESG effect, likuiditas has a positive ESG effect, and the overall aset does not have an ESG dampening effect. This study uses the ESG score to focus only on ASEAN banks who implement ESG.

ESG disclosures and corporate performance: A non-linear and disaggregated approach

The present study explores the association between Environmental Social Governance (ESG) disclosure and the operational, financial, and market-based performance of Indian corporations. The ESG score has been disaggregated into three sub-parts, i.e., EDS, GDS, and SDS (environmental, social, and governance disclosure scores, respectively). Using a sample of 305 companies listed in the NSE 500 (the largest stock exchange in India), linear and non-linear relationships among the variables have been investigated. The data has been compiled from 2014 to 2022 since the Indian government implemented the CSR mandate from the year 2014. The linear results of the dynamic panel data analysis technique have indicated that ESG disclosures significantly impact the market performance of business enterprises. Further, the non-linear results have indicated a U-shaped association between the composite ESG score and market performance. The disintegration of ESG score has revealed that while the social and governance components have a positive linear relationship with all performance indicators, the environmental sub-component has a U-shaped relationship with market performance. Hence, as the findings indicate that ESG-related activities impact firms positively after reaching a threshold, long-term planning and substantial resources are required to be dedicated in this direction.

The Effect of Financial Performance and Environmental Sensitivity on ESG Disclosure: Empirical Study in Agroindustrial Sector

Environmental, Social, Governance (ESG) has become an essential issue in business operation as a result from pressures from stakeholder such as government, society, creditors, and investors not to only seeking profit, but also preserving the environment, caring the society, and having good governance. The purpose of this study is to examine the effect of financial performance and environmental sensitivity on ESG implementation by using regression model. The financial performance measured by Return on Asset (ROA), environmental sensitivity measured by dummy variable which divided companies into two groups with high and low Green House Gas (GHG), and ESG disclosure measured by ESG indicators. There were 18 agroindustrial companies listed in Indonesia Stock Exchange from 2019-2021 observed. The result of this study showed that there was no significant effect of financial performance measured by Return on Asset (ROA) on ESG, otherwise there was positive significant influence of environmental sensitivity on ESG.

Impact of corporate social responsibility on cost of debt in Scandinavian public companies

Research background: In recent decades, companies have paid increasing attention to corporate social responsibility (CSR) and its related performance. Scandinavian countries lead the world in CSR and sustainability. The good CSR performance of Scandinavian companies has motivated studies on this phenomenon, particularly on the connection between a company's CSR and its performance. One of the most important performance indicators and value drivers is the cost of debt. Purpose of the article: This study assessed the impact of CSR on the cost of debt in Scandinavian public companies. Methods: The research was divided into two stages. In the first stage, Scandinavian public companies were divided into two groups (with and without ESG (environmental, social, governance) disclosure scores) to reveal differences in the cost of debt. In the second stage, a fixed-effects regression model for balanced panel data sets was applied from 2011 to 2020 to assess the impact of ESG and its pillars on the cost of debt. Findings & value added: The results revealed that the cost of debt of companies in Scandinavian countries with ESG disclosure scores was significantly lower. The ESG disclosure scores of these companies have increased significantly over the past 10 years. We found a positive impact of CSR on the cost of debt in Scandinavian public companies. The increase in ESG disclosure and pillar scores reduced the cost of debt. These findings are valuable from a scientific perspective. Scandinavian public companies with ESG scores have higher financial risk, but lower cost of debt. These results support the importance of investors' behavior, information asymmetry, and signaling. The findings have several implications for shareholders, managers and creditors. They suggest that creditors consider ESG disclosures when determining a borrower's creditworthiness. Additionally, it is a message to regulators that the debt market values ESG disclosures.

THE EFFECTS OF ENVIRONMENTAL, SOCIAL, AND GOVERNANCE (ESG) ON CORPORATE PERFORMANCE

This study has the purpose to discuss the effect of Environmental, Social, Governance (ESG) disclosure on market performance. The variables used in this study involved the dependent variable (Tobin's Q), the independent variable (ESG disclosure score), and the moderating variable (ROA and ROE). The population is obtained by the companies listed on the Indonesia Stock Exchange in 2016-2020. Sampling is done by purposive sampling. According to the purposive sampling method, samples are from 67 companies. The multiple regression analysis is used as the analytical method in this study. The results of this study revealed that Tobin's Q has a negative and significant effects on ESG score through ROA and ROE.

The relationship between corporate governance and environmental social governance disclosure: a case of Euro-Asian firms

Despite the clear commitment of major companies around the world to the ESG disclosure, this study aims to explore this gap by examining the extent to which listed companies have reported on the ESG Disclosure since the approval. This paper aims to explore whether some internal and external factors affect the environmental, social and governance disclosure. It also reveals how companies that publish non-financial reports are increasingly publishing ESG Disclosure. The methodology proposed will draw on the multidimensional scaling as a multivariate assessment tool to evaluate and prioritize the effect of corporate governance on the environmental, social and governance disclosure. This paper uses a cross-country sample of 455 listed firms located in forty countries over the period 2010–2018. Interestingly, the results that have been found highlight the importance of the effect of the Global Compact membership, the adoption the GRI Standards, the higher level of independence of audit committee; the ESG Performance and the CSR strategy improve the ESG disclosure. This study adds to the existing body of accounting knowledge in several dimensions. Indeed, this is one of the little studies that investigate in the effect of corporate governance on the environmental, social and governance disclosure of Euro-Asian firms

Relationship between Board Characteristics, ESG and Corporate Performance: A Systematic Review

In recent years researchers have been paying significant attention to Environmental, Social, Governance (ESG) principles as a crucial factor in company performance. This paper aims to summarize the trends and findings in academic literature devoted to the board of directors as a determinant of ESG performance and non-financial disclosure quality. This paper also summarizes the key findings for a board’s moderating effects on the impact of ESG on corporate financial performance. The results of qualitative analysis of more than 70 empirical papers demonstrate that board independence is the most widely considered parameter, interpreted as a positive factor for strengthening a board’s monitoring function according to agency theory. There is no consensus on board size: larger boards include directors who represent the interests of a wider range of stakeholders (stakeholder theory), however, the increase in board size leads to a complicationof decision-making and controlling processes. Researchers mostly agree that an augmentation of women’ and foreigners’ representation among directors positively affects ESG performance and disclosure quality, although the lack of critical mass may dilute this effect. As for CEO’s role in the board, while some researchers argue that CEO duality enhances agency conflict, deterring corporate transition to ESG, other authors claim that a CEO’s organizational power may enhance the ESG transition due to a faster implementation of board decisions. One of the crucial determinants for this effect is the board members’ diversified professional expertise, including specialized education and experience, for the effective monitoring of managers’ performance. Finally, there is a growing interest in the role of board sustainability committees,which accumulate the required professional expertise for developing environmental and social strategies (resource-based theory). By examining the key board characteristics’ effect on corporate ESG performance and disclosure quality, this paper contributes to corporate governance literature, expanding the field for further research. Moreover, the paper highlights several understudied issues for further research.

Analisis Pengaruh Environment, Social, Governance (ESG) Disclosure Terhadap Kinerja Keuangan Perusahaan

This case study discusses the effect of Environmental Disclosure (EVN), Social Disclosure (CSR), Governance Disclosure (CG) and Environmental, Social, Governance (ESG) disclosure on company performance, using control variables including asset turnover and asset growth. The variables that will be used in this study are the dependent variable (Return on Assets), independent variables (ESG disclosure, EVN disclosure, CSR disclosure, and Corporate Govenance Disclosure), and control variables (asset turnover and asset growth). The population in this sample will use manufacturing companies listed on the Indonesia Stock Exchange with a range of 2016-2020. Samples will be taken by purposive sampling method. Based on purposive sampling, it was found that there were 25 manufacturing companies listed on the IDX (2016-2020) that had complete data. The data analysis method used in this research is multiple regression analysis. In addition, this research also uses statistical techniques to test the hypothesys proposed in this study, namely panel data using SPSS. This study found that overall ESG Disclosure has a significant positive effect on company performance and CSR Disclosure has a significant negative effect on company performance.

Did the Inclusion of China’s A-Shares in the MSCI Index Improve the Information Content of Listed Firms? Analysis Based on Stock Price Synchronisation and Environmental Social Governance

Chinese A-shares were officially included in the Morgan Stanley Capital International (MSCI) Emerging Markets Index from June 2018. The inclusion of the A-share market into the MSCI Index is one of the most influential events in the opening up of the capital market of China. However, China’s A-share market has an imperfect system compared with that of developed countries. Stock price synchronisation is more serious in China than in developed countries, and Environmental Social Governance (ESG) disclosures are imperfect. Excessive stock price synchronicity can affect the information content of stock prices, and imperfect ESG disclosures are not conducive to the investment decisions of investors and thus not conducive to the price mechanism for adjusting the market. From the perspective of stock price synchronisation and ESG disclosure, this study discusses the impact of the exogenous event of the inclusion of A-shares in the MSCI Index on China’s capital market. Based on data of listed firms from 2011 to 2019, this study determines whether MSCI target stocks have high stock price information content and explores the ESG disclosure level based on a difference-in-differences (DID) model. In addition, this study conducts a parallel trend hypothesis test and propensity score matching (PSM) to test the robustness of the results. Empirical results show that the inclusion of A-shares in the MSCI Index increased the stock price information content and reduced the stock price synchronisation of MSCI target stocks. At the same time, this study tests the quality of the ESG information disclosure of A-shares after their inclusion in the MSCI Index and finds that the level of disclosure of the underlying stocks improved. This finding indicates that the inclusion of A-shares in the MSCI Index plays a role in improving the quality of ESG disclosure through information channels. The research conclusions have important implications for the active promotion of the expansion of the MSCI Index and further opening up of the capital market of China. In addition, the conclusions can provide a reference for subsequent MCSI decision-making and insights into the capital markets of other emerging-market countries.

Women board members’ impact on ESG disclosure with environment and social dimensions: evidence from the European banking sector

PurposeThis study aims to investigate the relationship between banks’ board structure and sustainability performance.Design/methodology/approachThe empirical quantitative paper covers a sample of 35 European banks that are listed at the EUROSTOXX 600. Regression analysis techniques were used in the analyses.FindingsResults indicate that board size, women ratio and independent directors ratio on board are positively and significantly related to environmental social governance (ESG), E and S disclosure scores. Also, we find that ESG disclosure is related to bank profitability.Practical implicationsFindings have implications for both policymakers and practitioners (bankers and investors). Large bank boards, which have women and independent members, could perform better in terms of ESG disclosure. The results also show that large banks and banks with high borrowing care more about sustainability. For banks to reach resources, they should perform well in terms of sustainability disclosure to their stakeholders.Social implicationsBanks should observe academic findings on corporate governance (CG) practices, which lead to a better ESG disclosure to structure their CG to improve at the best their disclosure policies: they should prefer larger boards with a high level of women and independence. In addition, we attach importance to the ESG performance of the banking sector due to its fund transfer functions. Banks transfer the deposits they collect to those in need of funds as loans. For this reason, it is important to which sector and which business they give credit. The importance of banks on ESG and their adoption of sustainability dimensions also affect their credit decisions.Originality/valueThis study examines the relationship between banks’ board structure variables and their effect on ESG, E and S scores separately. This study thinks that the G score can be a handicap for ESG-CG relations. Because chosen CG variables (women ratio, independent ratio, board size) affect G scores positively and can reason for positive ESG-CG relation. The environmental and social impact of women ratio, independent ratio and board size can be seen in this study.

Challenges in the EU Banking Sector as Exemplified by Poland in View of Legislative Changes Related to Climate Crisis Prevention

The activity and initiatives undertaken by financial institutions to protect the environment are now the goal of the evolution of the entire financial market. However, it is important not to ignore the legal issues and their implications, which to a large extent now permeate many financial decisions and affect the practices and behaviours of banks. The main objective of this paper was to identify the current condition of and ongoing developments in European Union legal regulations concerning Environmental, Social, Governance (ESG) and sustainable finance. An important aspect of this study was also to analyse the tools, legal instruments, standards and guidelines of the European Commission and the European Banking Authority (EBA) and those proposed by the international business environment in the area of non-financial reporting ESG disclosures in the EU banking sector as exemplified by Poland. In addition, this paper analyses the status of implementation of ESG-related requirements set by the EU legal framework by banks, banking associations and associations of cooperative banks operating in Poland. To achieve the objectives of this study, and to answer the research questions posed, an analysis of primary and secondary sources was carried out in conjunction with a review of the (national and foreign) literature on the subject. Two non-reactive research methodologies were used in the design of this study: the doctrinal legal method and desk research. The results of the analysis indicate that EU regulations are at the drafting stage and those adopted so far require a number of amendments. Banker associations have voiced extensive criticism of the regulations, which are viewed by banks as inadequate, unclear and inconsistent. Both EU and Polish banker associations primarily point to a high degree of generality in the solutions and legal frameworks adopted. The legal acts enacted to date do not correspond to the needs of the market. The analysis of the positions of the banking associations also revealed that the EU legislation still has gaps preventing a harmonised approach to the comprehensive and consistent integration of ESG factors by banks in their strategy and operations.

Sustainable corporate governance and non-financial disclosure in Europe: does the gender diversity matter?

PurposeRecent regulatory changes in Europe have promoted non-financial reporting practices (e.g., Directive, 2014/95/EU) and gender diversity in decision-making positions. Special attention is devoted to promoting the gender balance on corporate boards as a key mechanism to enhance corporate governance effectiveness and better address multiple stakeholders' needs. With this in mind, this study intends to examine the impact of boardroom gender diversity on Environmental Social Governance (ESG) disclosure practices in the European listed firms' context.Design/methodology/approachThe study applies different panel data models on an extended sample of 1,392 firms from 21 European Union (EU) countries for six years (2014–2019).FindingsFindings allow to spotlight the positive role exerted by the presence of women directors on the boards in enhancing ESG disclosure, both at the overall and specific (individual ESG scores) level.Research limitations/implicationsPolicymakers and regulators might consider the study's evidence as a stimulus to continue in promoting strategic actions and reforms that foster gender equality and balance in corporate decision-making positions.Practical implicationsCreating a heterogeneous and diversified board of directors may support implementing a “sustainable corporate governance” recently claimed by the EC.Originality/valueThe study contributes to the literature by disentangling the links between gender diversity and ESG disclosure over a period that covers a long season of European regulations and measures that affected both non-financial reporting practices and the board of directors' composition. Accordingly, it can contribute to enhancing the practical and theoretical understanding of the pivotal role that gender diversity may exert in strengthening corporate governance and, in turn, corporate transparency and accountability behaviours about non-financial issues.

Improving CSR and ESG Disclosures: Alternatives and Suggestions for Securities Law Reforms

There is ever-increasing investor interest in corporate social responsibility (CSR) generally and environmental social governance (ESG) in particular. Investors’ desires have triggered increased corporate ESG disclosures. As pressure for ESG-related disclosures continues to rise, there is increasing pressure on the SEC to support enhanced ESG disclosures. Notwithstanding many calls for mandatory ESG disclosures, the SEC has not implemented such a requirement. Instead ESG disclosures are voluntary. Voluntary ESG disclosures are common but to a large extent are marred by a lack of standardization in ESG data methodology. The increasing investor interest in ESG have led publicly held companies to take various approaches in framing their ESG disclosures. Many observers have asked the SEC to take a more active role with respect to ESG disclosures. Some observers call for mandatory ESG disclosures. To date, the SEC’s approach has been limited to providing guidance for companies electing to make ESG disclosures. This article analyzes the various ways in which the SEC could mandate or encourage better ESG disclosures. The article concludes that regardless of whether the SEC imposes mandatory disclosures or continues its voluntary approach, the SEC should a adopt a safe harbor rule. A safe harbor rule would encourage ESG disclosures while at the same time limiting but not eliminating the risk of liability for defective ESG-related disclosures. The article begins with a description of the current state of ESG disclosures. This is followed by a brief overview of the securities laws’ disclosure obligations. The article then explains materiality – a concept that is the lynchpin of the securities laws’ disclosure requirements. This is followed by exploration of the potential ways to enhance CSR and ESG disclosures including the advisability of mandating disclosure or taking additional steps to encourage voluntary disclosure. Specifically, the article suggests that a safe harbor rule would be an important step in improving ESG disclosures.

Business strategy for environmental social governance practices: evidence from telecommunication companies in Malaysia

Purpose The present digital era has integrated the conventional telecommunications companies as service providers in this ever-competitive environment. Towards gaining business competitiveness, businesses are operated from the stance of dynamic business model that places focus on both economic activities and, more importantly, value-added benefits. One essential value embedded into business strategies refers to the aspect of sustainability in conjunction to environmental social governance (ESG). Within the context of Malaysia, ESG practices have been expected to grow rapidly in years to come, along with the vision of becoming a digital economy nation, by 2050. The continuous discussions appear to support the significance of implementing ESG practices amidst organizations, which in turn, could enhance a more sustainable economic growth for the country. Although many studies have probed into the dimensions of ESG, little attention has been given to the ESG practices incorporated into business strategy agenda. Design/methodology/approach This paper combed through the literature to retrieve the multi-dimensions of ESG concepts, as well as related in-depth insights into ESG disclosures amongst leading companies established in Malaysia. As for the research design, this study used the content analysis method and the ESG Grid as the benchmarking tool to explore superior commitments amongst its peers. Findings As a result, this study stumbled upon two major outcomes: the pattern of ESG disclosures in telecommunications industry and the approaches in implementing ESG practices in telecommunications companies. These two aspects appear essential to establish a competitive advantage, apart from addressing the issues raised by concerned stakeholders. Research limitations/implications Future studies may explore deeper into comprehending the ESG practices by using the interview method and incorporating other industry or arena. Practical implications The decisions made by the companies to invest in ESG practices mark the ability of a company in devising viable survival strategies within the industry. Originality/value Hence, this study offers several vital insights into the practical value to learn from the best experiences, aside from analyzing the current progress of ESG practices within the context of developing nation.

Corporate governance and environmental social governance disclosure: A meta‐analytical review

AbstractThis paper provides, to the best of the authors' knowledge, the first meta‐analysis of evidence about the influence of the corporate governance on environmental, social, and governance (ESG) disclosure, in a setting where the disclosure of information is voluntary but not discretionary. We apply meta‐analysis to a sample of 24 empirical studies to clarify the relationship of board size, board independence, women on board, number of board meeting, CEO duality, and company ownership with ESG disclosure. Our results show that board independence, board size, and women directorship visibly enhance ESG voluntary disclosure; board ownership and CEO duality do not improve the level of ESG disclosure; and some hesitations remain in respect of the number of board meetings and institutional and family ownership. The paper contributes to the ongoing debate on the corporate governance mechanisms that lead to more ESG disclosure and highlight the need of new approach on these issues.

Transparency among S&P 500 companies: an analysis of ESG disclosure scores

PurposeThe purpose of this paper is to explore the state of S&P 500 companies’ transparency by analyzing their Bloomberg ESG (Environmental-Social-Governance) disclosure scores. Additionally, the effects of industry sector, firm size, and governance practices on transparency are examined.Design/methodology/approachData were retrieved from Bloomberg using the financial analysis environmental, social and governance function for companies comprising the S&P 500 index. Descriptive statistics are provided on each of the three components separately (ESG). Nonparametric procedures are used to test for significant differences in transparency within each of these three areas based on industry sector. Additionally, nonparametric tests are used to determine the impact of firm size (market capitalization) and governance factors (board size, board gender diversity, chief executive officer (CEO) duality, and linking executive compensation to ESG disclosure) on the composite ESG score.FindingsDescriptive statistics reveal that S&P 500 companies differ in their level of disclosure across the three areas (ESG). The highest level of transparency is found on Governance and the lowest on Environmental. Moreover, there is much variability in the percentage of S&P 500 companies disclosing information about specific Social policies (e.g. child labor). Significant differences in transparency on both the Social and Governance dimensions are found between certain industry sectors. The results also reveal that large-cap companies have significantly higher ESG disclosure scores than mid-cap companies and that governance factors impact ESG disclosure. Significantly, higher ESG disclosure scores are observed for S&P 500 firms with larger boards of directors, with boards that are more gender diverse, that allow CEO duality, and that link executive compensation to ESG scores.Originality/valueThis study focuses on corporate transparency through a granular analysis of ESG disclosure scores when most other studies have been primarily conducted at the macro level. Stakeholders, analysts, and shareholders are increasingly scrutinizing firms’ sustainability disclosures in their assessment of management quality, as it reflects on the practices/policies that are employed to improve firms’ environmental and social footprints.