ESG Data Research Articles

About Development of International ESG Disclosure Standards

Currently, sustainability factors have a significant impact on the economic and investment decisions of companies around the world. ESG data is included as part of the non-financial information, the disclosure of which poses a number of challenges in practice. The main being the lack of universal reporting rules. This article examines the most successful global initiatives aimed at developing and implementing international ESG disclosure standards. The provisions of the latest standards and guidelines governing the procedure, scope and principles for preparing reports on the company’s impact on environmental, social and governance aspects of responsible production are analyzed.

CEO foreign experience and corporate environmental, social, and governance (ESG) performance

AbstractThis research examines the impact of the Chinese CEOs with foreign experience from developed nations on the firm's environmental, social, and governance (ESG) performance, drawing on imprinting theory, stakeholder theory, and resource dependence theory. Using manually collected data of CEOs' foreign experience and corporate ESG data from the Bloomberg database for Chinese listed firms from 2011 to 2020, we observe that CEOs with foreign imprinting tend to improve their corporate ESG performance in China. The positive relationship between CEO foreign experience and corporate ESG performance is more significant when the CEO is female, when the CEO is more educated, and when the firm is state‐owned. To better understand the underlying influence, our study indicates that the influence of CEOs' foreign experiences on corporate ESG performance is primarily manifested in the advancement of corporate social and environmental responsibility. Section 4.3 reveals that experiences obtained from developed economies have a more pronounced impact on promoting firms' ESG performance compared to experiences gained in underdeveloped countries. This empirical evidence underscores the significance of foreign experiences gained in developed economies in driving firms' ESG performance. Overall, our research makes a contribution to the study of CEOs' foreign exposure and corporate ESG performance.

The moderating role of CSR in the relationship between earnings management and cost of equity: evidence from European ESG data

PurposeThe present work aimed to identify the impact of accrual-based earnings management on the cost of equity (KE) through corporate social responsibility (CSR) as a moderating variable on European Environmental, Social, and Governance (ESG) companies.Design/methodology/approachThe authors used data from a sample of 366 European firms over the 2012–2022 period. The data were collected from the Thomson Reuters Asset 4 and I/B/E/S database and analyzed using STATA 17 as a statistical software package.FindingsAs expected, the results showed a negative relationship between accruals, CSR and KE. Moreover, they suggest that the moderating variable negatively affects the relationship between accruals and the KE.Practical implicationsThe results are pertinent to stakeholders and investors, who would pressure companies to enhance the quality of disclosed information and mitigate risks facing the company.Originality/valueThe main contribution lies in examining the relationship between accruals and KE through CSR in the European ESG context.

Green, green, it’s green they say: a conceptual framework for measuring greenwashing on firm level

AbstractThis paper proposes a conceptual framework to determine a greenwashing indicator on firm level, based on five pillars of information that capture the key drivers of greenwashing: soft ESG data, textual self-representation, green marketing expenses, green virtue for the apparent green performance, and hard ESG data as a measure of the real green performance. The proposed framework is built on a literature review of greenwashing typology and drivers and can be applied to a broad set of firms at the same time, while most existing approaches are built on a detailed investigation of individual cases. The greenwashing indicator in our framework is based on the difference between real and apparent green performance. This approach allows the implicit calculation of the real green performance using the concept of a firm misconduct factor that helps to identify the greenwashing indicator without knowledge of the real (and often hard to measure) green performance of a firm.

Report on the 8th Annual EFILA Lecture on ESG Investment Strategy

On 13 October 2022, the European Federation for Investment Law and Arbitration (efila) hosted its 8th Annual Lecture in Brussels on “esg Investment Strategy”. For the first time two speakers rather than one discussed esg issues from different perspectives. Jillian Kirn provided the legal framework regarding esg, while Laurent Lhopitallier explained the practical implications of implementing esg from Sanofi’s experience. The ensuing debate illustrated that esg is moving fast and that the increasing disclosure obligations for companies will have a significant impact on companies’ esg ambitions. The challenges that the growth of esg will pose was also discussed, in particular as regards the collecting verifiable esg data and the ranking of companies based on this data. Generally, it was concluded that both companies and States must be more ambitious in the esg standards they aim to achieve.

Investigating the Influence of Green Technology Innovations on Energy Consumption and Corporate Value: Empirical Evidence from Chemical Industries of China

This study investigates the impact of green technology innovation on energy consumption and corporate value in China's chemical industries, utilizing data from 133 A-share listed enterprises over the period of 2013-2022. Data on green technology innovation are sourced from the Chinese Research Data Services (CNRDS) Platform, while energy consumption data are obtained from listed companies' annual reports, social responsibility reports, and websites. Corporate ESG data is sourced from Huazheng ESG rating, and other data are obtained from China Stock Market & Accounting Research Database (CSMAR) and the National Statistics Bureau. Employing a two-way fixed effects model, this finds that green technology innovation mitigates energy consumption, and boosts corporate value of Chinese A-share listed enterprises of chemical industries. The study ensures the robustness of its findings through 2SLS analysis, using green patent applications as instrumental variables. The moderating effects of ESG disclosure are found significant to strengthen the influence of green technology innovation on energy consumption and corporate value. These findings offer valuable insights for policymakers and stakeholders in shaping strategies to promote sustainability and competitiveness in the chemical industry.

What you see is what you get? Building confidence in ESG disclosures for sustainable finance through external assurance

AbstractThe main objective of this study is to understand the value of environmental, social, and governance (ESG) disclosure assurance in the context of the development of sustainable finance standards and laws. This study is based on an analysis of 188 comment letters submitted by such actors in the context of public consultations on the development of three new sustainable finance initiatives (the CFA Institute, the Financial Conduct Authority in the UK, and the New Zealand parliament). The study shows these actors' nuanced and often quite critical perceptions of the effectiveness of external assurance in preventing greenwashing and their reservations about its mandatory nature. These actors have raised various criticisms, including concerns about the vagueness surrounding verification practices; the lack of expertise available to conduct assurance in a new, specialized, and complex field; the costs of the assurance process, particularly for small players; and the lack of control over the reliability of the ESG data used. This article contributes to several emerging trends in the literature—in particular, research on governance practices to prevent greenwashing, on the institutionalization of sustainable finance standards and laws, and on the role of rational myths in the assurance process for ESG disclosures.

Impact of Corporate ESG Performance on Equity Returns

In the context of sustainable development, ESG is no longer a theoretical concept, but is gradually put into practice. Corporate decision makers, market investors and regulators are all attach more and more attention to ESG information. Whether the efforts made by companies in ESG can bring the companies due returns? Whether excellent ESG performance attracts investors and brings them excess returns? Whether ESG information can help regulators to promote a stable and growing market? This paper uses Bloomberg ESG data and a sample of 242 companies from 2011 to 2020, to answer these questions. This study finds that ESG performance does not generate positive returns for firms and investors. Furthermore, for state-owned enterprises and heavily polluting firms, the sacrifices made in ESG performance are greater. This study theoretically analyses the reasons for the negative correlation between the two research subjects. It alerts the tripartite participants to look at ESG disclosure information in a critical way.

ESG performance and technological change: Current state-of-the-art, development and future directions

The increasing prevalence of environmental risks, the growing pressures from stakeholders and the development of ESG standards have prompted companies to embrace an environmental, social, and governance (ESG) commitment. In such a scenario, technological change and innovation are pivotal enablers to improve how companies monitor their ESG data for disclosure purposes, and significantly enhance their strategic ESG performance in several ways, such as by reducing emissions and environmental impact. The adoption of digital solutions for ESG performance has drawn the attention of academics and practitioners, leading to a significant increase in scientific production in the past few years. Yet, extant literature appears fragmented and scattered, despite the fast pace at which it is developing. Consequently, the present study conducts a systematic review of 89 distinct contributions ranging from 2017 to 2023, in order to acquire pertinent information regarding the current status of the topic and draw several lines for future research. The review identifies three main thematic areas, namely the use of digital technologies to enhance the transparency and reliability of ESG data tracking and reporting, the peculiarities of strategic ESG performance when it comes to high-tech companies, and the direct effects technological change has on ESG performance. The study provides a critical overview of each of the thematic areas mentioned above, along with a structured research agenda, thus contributing to the theoretical and managerial discussion on ESG performance and technological change.

A comparative analysis of nutrition-related assessment criteria and associated nutrition performance scores of food companies across three prominent corporate sustainability assessment tools.

Corporate sustainability assessment tools are increasingly used to evaluate company performance on environmental, social and governance (ESG) criteria. Given the growing burden of diet-related disease and nutrition-related business risks, it is important to understand the scope of nutrition-related ESG data currently available. This study aimed to compare the nutrition-related assessment criteria and associated food company performance across three prominent assessment tools. Key attributes and assessment criteria of two civil society-led and one commercially available corporate sustainability assessment tools were extracted and compared for the year 2021. Company performance scores for twenty-five major food and beverage manufacturers using these three tools were analysed by nutrition domain: 'Product Portfolio', 'Labelling', 'Marketing', 'Accessibility and Affordability', 'Governance and Reporting', 'Stakeholder Engagement' and 'Employee Health'. To enable comparison between tools, company performance scores were assigned to categories of low (score = 0-25 % score or D), moderately low (25-50 % or C), moderately high (50-75 % or B) and high (75-100 % or A). Global. N/A. The tools covered similar nutrition domains; however, there was heterogeneity in the assessment criteria used to evaluate each domain. When applied to assess the performance of twenty-five major food and beverage manufacturers, a median nutrition-related performance score of moderately low or low was observed across all tools. The highest scoring domain was 'Governance and Reporting', and the lowest scoring domains were 'Product Portfolio' and 'Accessibility and Affordability'. Greater standardisation of the nutrition-related criteria against which food companies are assessed is needed as part of efforts to drive improvements in food company practices.

The Congruence of Sustainable and Learning Organizations: An Insight into the ESG Disclosures of Shell plc

Companies are pledging to improve their environmental and social performance to a huge extent. They have made sustainability their goal or adopted the “triple bottom line” term which is a harmony between their financial, social, and environmental performance. Nowadays, Environmental, social, and governance (ESG) factors are one such category of information that is becoming more and more well-known and considered by mainstream investors around the world. Learning organizations can learn at a remarkable rate and improve their performance. This paper focuses on the unity of sustainability and learning organization. Thus, using dimensions of learning organizations and disclosures of a chosen company this paper inspects whether an organization that fulfills the requirements of a learning organization has elaborated ESG disclosures. The chosen company is Shell plc. ESG data covers a wide range of topics, such as accounting for a company's carbon footprint, its labor and human rights practices, and its corporate governance frameworks. ESG aspects are being emphasized by policymakers, asset owners, and the public to support sustainable business practices and goods. It can be said that an organization that can be termed as one that learns will have a sustainability element. The phrase "sustainability-focused organizational learning" (SFOL) be used to represent the early experiences of businesses that are seeking to pursue sustainability or the triple bottom line while making significant changes to their organizational cultures.

Non-Financial Capital Value Creation: Assessing Japan's Path to an ESG-Friendly Economy through the Yanagi Model

This paper explores the possibility of Japan adopting the Non-Financial Capital and Equity Spread Synchronization Model, also known as the Yanagi Model, to build an ESG-friendly economy. The Yanagi Model focuses on incorporating non-financial elements, such as environmental, social, and governance factors, into companies' traditional financial performance measures. By doing so, the model aims to enhance firms' long-term sustainability and value creation. The paper assesses the potential benefits and challenges of implementing the Yanagi Model in the Japanese context through a review of relevant literature and case studies. The literature suggests that integrating ESG factors can lead to improved financial performance, reduced risk, and increased reputation for companies. However, there are also concerns about the lack of standardization and transparency in ESG data, as well as the potential for greenwashing or superficial adoption of ESG practices. Despite these challenges, the paper argues that the Yanagi Model could serve as a viable path for Japan to build an ESG-friendly economy, given the country’s recent push for sustainability and the growing demand for socially responsible investments. The paper suggests several recommendations for improving the model, such as increasing transparency and standardization in ESG data, enhancing stakeholder engagement, and promoting a culture of long-term value creation. Overall, the paper concludes that while there are challenges to adopting the Yanagi Model, its potential benefits for building a sustainable and ESG-friendly economy in Japan make it a worthwhile pursuit.

Проблема дивергенции оценок, присуждаемых лицами, оказывающими услуги по оценке устойчивого развития. Главные тренды в области законодательного регулирования института ESG-рейтингования в России и мире

Confidence in environment, social, and governance (ESG) ratings among investors remains at a fairly low level. An Edelman Insights study [2021] reported that almost three out of four institutional investors do not trust companies to achieve their stated commitments in the fields of sustainability, ESG, or diversity, equity, and inclusivity (DEI). One of the reasons for this distrust is the divergence of ESG ratings – that is, the difference in ratings given by different ESG agencies to the same companies. The origins of this problem lie in the fact that there is still no developed framework to regulate the process of assessing the sustainable development of companies. However, more and more international actors are becoming involved in this issue in order to increase confidence in the assessments of ESG rating providers. For example, codes of conduct for data and ESG ratings providers have already been issued by the United Kingdom (UK), the European Union (EU), India, and Japan. The Central Bank of Russia also issued an information letter on the regulation of the activities of ESG rating providers in the summer of 2023. This article studies the problem ESG ratings’ divergence and determines ways to solve it through the development of regulatory control. It also studies the main trends in the legislative regulation of this institution in order to implement them into the Russian regulatory framework. In this regard, an analysis of work by Russian and foreign researchers devoted to the study of differences in ESG ratings was carried out; additionally, the main approaches of international organizations and legislative bodies of Russia and other countries in the sphere of regulating ESG information providers and mandatory non-financial reporting of companies were studied. The main problems affecting the reduction of ESG data correlation are identified, solutions for them are proposed, and the key trends in improving the comparability of ESG ratings by international actors are noted. The comparative legal method was used in the study. The analysis shows that international actors resolve the problem of divergence by increasing their interpretability, but not through strict regulation. They propose to develop basic recommendations regarding methodologies, evaluation criteria, and weighting factors, while at the same time consolidating the responsibility of ESG rating agencies to disclose their methodology, the terminology used, and their rating definitions. The task is to create harmonized standards for, and transparency of, the ESG assessment process.

Environmental, social, and governance (ESG) performance and financial outcomes: Analyzing the impact of ESG on financial performance

BackgroundEnvironmental Social Governance (ESG) investment had entered a phase of rapid development in the past few decades as most nations had put forward “carbon neutral” initiatives. ESG would receive more attention from the industry and academia in a global environment full of uncertainties. Companies benefit from the sharing of ESG data by improving their brand image, which attracts funding, lowers financing costs, and increases valuation. PurposeTo explore how ESG drives corporate financial performance. Also, the research examines the interrelation of ESG presentation and corporate presentation. Design/methodology/approach: Over an interval of 10 years (2011–2020) using a sample of 3332 listed organizations worldwide. The theory of the research is on the basis of stakeholder and transmitting signal theory and multiple regression and categorized regression were applied with STATA 16.0 software. ResultsThe study utilizes a large dataset of 24,076 valid observations, providing robust statistical power for the analysis. The study findings proved that ESG performance is positively interrelated with corporate performance (p < 0.01). According to the findings of the study, at 1% of the level related to significance (p < 0.01), the regression coefficient for ESG is considerably positive. Thus, the influence of ESG rating on corporate performance is significant for large-scale companies and insignificant for small-scale companies. The results demonstrate that the positive impact of ESG rating on corporate financial performance is more pronounced in the high risk case than in the low risk case (p < 0.01). The results highlight the importance of ESG performance in today's world. Overall, the study gives precious perception about the interrelation between ESG and corporate financial performance (CFP). Policy implicationsThe researchers believe that the results of this study are beneficial to companies and governments in the development of environmentally conscious industries since they demonstrate corporate success through ESG. More realistically, the ESG can boost corporate firm performance by enabling businesses to maintain sustainability, establish a solid reputation, win the trust of stakeholders, and contribute to solving national sustainable development issues. Additionally, the researchers believe that the results of this study can boost management effectiveness, which in turn can help firms succeed. Originality/valueIn the context of environmentally sensitive industries, this study findings provide empirical insights to the association between the corporate firms success and ESG performance. In addition, the findings provide insights to the business organizations development and the significance of ESG integration in the business organizations.

Is ESG Data Financially Viable? A Case of Stock Price Synchronicity

According to the information efficiency view, stock price synchronicity reflects the degree of integration of firm-specific information with market-level information. Stock price synchronicity is higher (lower) when there is a higher (lower) level of integration between the firm and the overall market information. As the disclosure of environmental, social and governance data provides more firm-specific, non-financial, value-relevant information to the market, stock prices reflect such information efficiently. It leads to more information efficiency and lower synchronicity of stock prices. Against this backdrop, the present study examines the relationship between ESG and its component scores and stock price synchronicity using a sample of 163 Indian companies reporting their ESG scores through the Thomson Reuters database from 2011 to 2021. The findings of the study confirmed that the ESG score and the scores of its components (except the governance score) have a significant negative impact on stock price synchronicity and a significant positive impact on idiosyncratic volatility. This is consistent with the information efficiency viewpoint, implying that ESG disclosure has value relevance in the capital market and that investors in the Indian market consider ESG information when making investment decisions.

Determining the underlying role of corporate sustainability criteria in a ranking problem using UW-TOPSIS

AbstractESG criteria are becoming increasingly important for institutional and retail investors with a consequent growing demand of reliable and transparent ESG data to support their decisions. Several ESG rating agencies assess companies providing ratings and rankings. However, their rating methodologies are subject to some criticisms. One of the main weaknesses is the determination of the relative importance of the ESG criteria involved in the rating process. In this work, we propose the use of a MCDM rating and ranking approach with which the decision maker can rank firms based on their ESG global performance without the elicitation of aggregation weights. The approach, UW-TOPSIS, provides three outputs: the global ESG rating of the firms, a ranking based on the ratings and, for each alternative, a vector of weights describing the discriminatory power of the ESG criteria on the alternative, thus overcoming one of the criticisms to the methodologies of ESG rating agencies. However, UW-TOPSIS has a limitation as it does not provide a global vector of weights valid for all the alternatives in the ranking, expressing the overall role or contribution of each criteria to the componsition of the ranking. The acknowledge and analysis of this situation and the proposal of a solution, is the main objective of this paper.

Fintech Data Infrastructure for ESG Disclosure Compliance

Regulations related to the disclosure of environmental, governance, and social (ESG) factors are evolving rapidly and are a major concern for financial compliance worldwide. Information technology has the potential to reduce the effort and cost of ESG disclosure compliance. However, comprehensive and accurate ESG data are necessary for disclosures. Currently, the availability and quality of underlying data for ESG disclosures vary widely and are often deficient. The process involved with obtaining ESG data is also often inefficient and prone to error. This paper compares the models used and the evolution of Fintech data infrastructure developed to support financial services with the requirements and trajectory of ESG disclosure compliance. Based on existing Fintech models, it presents a sustainability data infrastructure framework that aims to address current ESG data challenges, including data governance concerns, on a large scale. In conclusion, it highlights key considerations and recommendations for policymakers.

Portfolio Optimization Using Markowitz Model on Sri-Kehati Index

This thesis investigates the portfolio optimization process using the Markowitz model on the SRI-KEHATI index, an esteemed sustainable investment index. The study aims to explore the potential advantages of incorporating environmental, social, and governance (ESG) factors into portfolio construction. By leveraging historical financial data and reliable ESG metrics, this research develops optimized portfolios that strike a balance between risk and return while adhering to the sustainability criteria of the SRIKEHATI index. The methodology encompasses the collection of credible ESG data and financial information for the constituents of the SRIKEHATI index. The Markowitz model is subsequently employed to analyze the risk and return characteristics of each asset within the portfolio. Through the application of optimization algorithms, the study seeks to identify the optimal asset allocation that maximizes risk-adjusted returns, taking into account the ESG criteria outlined by the SRI-KEHATI index. The outcomes of this research provide valuable insights into the effectiveness of portfolio optimization techniques within the realm of sustainable investing. By considering both financial metrics and ESG factors, investors can construct portfolios that align with their sustainability objectives while optimizing risk and return. The findings shed light on the performance of the optimized portfolios and compare them with conventional approaches, thereby demonstrating the potential benefits of integrating ESG considerations into portfolio decision-making. Additionally, this study examines the practical implications associated with implementing sustainable portfolio strategies based on the SRI-KEHATI index. Overall, this thesis contributes to the expanding body of knowledge on sustainable investing and portfolio optimization, specifically focusing on the SRI-KEHATI index. It provides valuable insights for investors, asset managers, and policymakers interested in sustainable investment strategies. Furthermore, it offers a framework for incorporating ESG considerations into the portfolio construction process using the Markowitz model, thereby aiding in the development of more robust and sustainable investment portfolios.

An ESG Assessment Approach with Multi-Agent Preference Differences: Based on Fuzzy Reasoning and Group Decision-Making

The adoption of Environmental, Social, and Governance (ESG) to measure the green development, social responsibility, and public interest of companies is a commonly accepted theme and approach in the industry and academia at present. As ESG assessment is characterized by heterogeneity of subjects, complexity of contents, diversity of scales, and uncertainty of weights, it has led to the variability of ESG assessment results given by different assessment organizations in the same company, which has attracted a lot of criticism. This paper proposes a group decision-making method based on the preferences of multiple subjects to solve the problem of heterogeneity of subjects in ESG assessment. Specifically, for the given ESG evaluation data, the first step is to identify the preferences of subjects and structure the initial group matrix; secondly, the fuzzy inference system is employed to mine the hidden preference information; further, the initial group matrix is revised using the preference information; and finally, the TOPSIS method is applied to aggregate the information and obtain the final ESG score and ranking of each company. This study was tested using statistics from 30 companies released by Harvest Fund in May 2021, which verified the validity and advantages of the method proposed in this paper. The proposed method integrates the preferences of heterogeneous subjects and mines the possible hidden preference information, which increases the interpretation of the information contained in the original ESG data and facilitates the achievement of group consensus.

ІНФОРМАЦІЙНА ПРОЗОРІСТЬ У СЕГМЕНТІ ВІДПОВІДАЛЬНОГО ІНВЕСТУВАННЯ

The pandemic has dramatically changed the global situation in terms of achieving the Sustainable Development Goals (hereinafter referred to as the SDGs). Currently, the slow pace of achieving the SDGs is due to limited financial resources. In order to find ways to solve this problem, this paper analyzes responsible investment instruments (also called ESG investments) and ways to increase the efficiency of their use in the context of information transparency as an alternative to traditional financing instruments. In particular, the article proposes a scientific and methodological approach to the calculation of ESG indices by incorporating the company's position in the ESG rating (environment, social, and corporate governance) as additional weights, which, unlike the traditional approach, allows the calculation of the index to take into account not only the company's capitalization but also the level of success of its ESG activity. The effective use of responsible investment instruments will create the necessary preconditions for overcoming the existing shortage of financial resources in achieving the SDGs. It has been proven that the first step should be the concentration of regulatory efforts on the unification (standardization) of ESG information disclosure processes. The problem lies not only in the lack of ESG data, but also in the lack of their systematization. Even companies that provide information about their ESG activities use different methods, from corporate websites to annual reports or sustainability reports. That is, collecting, summarizing, systematizing ESG data in such conditions is quite a difficult task.