ESG Disclosure Research Articles

Pengungkapan Emisi Karbon dan Pengungkapan ESG terhadap Efisiensi Investasi dengan Fleksibilitas Keuangan sebagai Variabel Moderasi

This research refers to the current issue related to investment efficiency carried out by major energy and infrastructure companies, which can certainly be influenced by various factors even though sustainable accounting is applied by the company. With this problem, the author raises several variables to obtain knowledge related to the relationship of the influence given by the Carbon Emission Disclosure and ESG Disclosure variables on Investment Efficiency with the Financial Flexibility moderation variable. The analysis method used in this study is a panel data model with purposive sampling technique. In this study, the data used uses secondary data taken from annual reports and sustainability reports on major energy and infrastructure sector companies listed on the Indonesia Stock Exchange from 2020 to 2022. From the results of the research that has been conducted, it can be concluded that the Carbon Emission Disclosure variable has a positive influence on Investment Efficiency, another positive influence is given by ESG Disclosure on Investment Efficiency, and Financial Flexibility moderates or strengthens the influence of Carbon Emission Disclosure on Investment Efficiency, but Financial Flexibility cannot strengthen the influence of ESG Disclosure on Investment Efficiency.

Information disclosure and ESG rating disagreement: Evidence from green bond issuance in China

We explore the relationship between information disclosure and ESG rating disagreement using China's A-share listed companies' green bond issuance from 2011 to 2021. We find a significantly positive correlation between corporate green bond issuance and ESG rating disagreement, which suggests that the ESG ratings disagreement among rating agencies tends to increase for firms with the issuance of green bonds. The results hold valid after a series of robustness tests. We also find that after issuing green bonds, the firm's ESG disclosure score improves significantly, especially in the environmental and social disclosure score components, indicating that firms indeed disclose additional environmental and social information along the issuance of green bonds, which leads to the increase of ESG rating disagreement among rating agencies. Especially, the effect on ESG rating disagreement of the information disclosure is more prominent for firms with more related information disclosed and more attention. In further analysis, we find a positive moderating effect of ESG reports between green bond issuance and ESG rating disagreement.

Chinese Sustainable Development Review

ESG refers to the three sustainability factors of Environmental, Social, and Governance, and is a framework for assessing and measuring corporate's performance and impact in these three areas. China's ESG practices and development have received increasing attention and promotion in recent years. However, compared to the relatively mature ESG disclosure and rating systems in advanced countries in Europe and the United States, China's ESG system still faces challenges such as incomplete information disclosure and inconsistent rating standards. This paper focuses on analyzing the carbon emission levels and ESG disclosure within China's enabling and driving industries. It also takes petroleum and petrochemical, food and beverage, textile and apparel, automobile manufacturing, and electronic and electrical appliances in the enabling industries as representatives analyzes the differences in ESG reports between domestic and foreign enterprises in the corresponding industries, and clarifies the key indicators for ESG ratings. Based on these findings, this study formulates an industry-specific ESG rating index matrix that is tailored to China's national conditions, and emphasizes the weight of “E” to highlight the contribution of corporate ESG to the dual-carbon goal and circular economy, providing a valuable reference for The rating index matrix helps to solve the problems of incomplete information disclosure and inconsistent rating standards in China's ESG practice and promotes the enabling industry in China to achieve better results in sustainable development.

Pengaruh Pengungkapan ESG, Financial Leverage, Operating Leverage Terhadap Risiko Sistematis

This study aims to analyze the effect of corporate sustainability, financial leverage, operating leverage on systematic risk. This research uses quantitative methods. The data used is ESG scores and financial reports available on the Indonesian Stock Exchange. The samples used in this study are company that listed on ESGL Index in period quartal 1st in 2021 until quartal 1st in 2023. Data were collected using purposive sampling. The total number of sample in this study is 46 companies with 9 period quartals, resulted 197 data. The result of the study using liniear regression analysis indicate that financial leverage has a positive effect on systematic risk. Then the results of linier regression analysis indicate that operational leverage and esg disclosure doesn't have any effect on systematic risk. Keywords: Systematic Risk, Esg Disclosure; Financial Leverage; Operating Leverage

Uncovering lobbying strategies in sustainable finance disclosure regulations using machine learning

PurposeWe analyse lobbying behaviour by using Machine Learning approaches. In the context of Sustainable Finance Disclosure Regulation (SFDR), we gain detailed insights, assign these to existing strategies, and measure how strongly which participant influences the regulation. Study design/methodology/approachWe use tri-gram analysis, sentiment analysis, and similarity analysis as methods to obtain insights into the political commentary process of European Supervisory Authorities (ESAs) drafts dealing with SFDR. FindingsOur metadata helps to identify stakeholders and lobbying strategies. We found that the most negative comments came from the regulated, who argued strongly subjectively in a very objective environment of ESG disclosure. We also identified typical lobbying strategies based on arguments, persuasion, and classic cost-benefit considerations. Originality/valueWe generate emotion values and synthesise detailed argument differences and show that modern algorithms can contribute to the identification of interest groups and lobbying strategies. Furthermore, we generate similarity values of arguments that can be taken into account in the analysis of the success of a lobbying strategy.

ESG disclosure and financial performance: Empirical study of Vietnamese commercial banks

Environmental, social, and governance (ESG) disclosure becomes vital for banks to be transparent and accountable for their investments and lending decisions to shareholders, regulators, and society. The potential enhancement of shareholder value through ESG disclosure is still inconsistent. Empirical studies on the association between ESG disclosure and financial performance are mixed and limited in emerging economies. This study aims to examine whether ESG disclosure impacts the financial performance of 24 Vietnamese commercial banks in terms of return on assets (ROA), return on equity (ROE), and net interest margin (NIM). The study uses the feasible generalized least squares estimation method based on panel data from 2018 to 2022. The study employs content analysis on 12 themes related to environmental, social, and governance pillars to score policy disclosure based on the Fair Finance Guide Methodology. The results highlight the positive effects of ESG policy disclosure, individual environment disclosure (E), and individual governance disclosure (G) on bank financial performance. Notably, ESG, E, and G have the largest influence on ROE, with coefficients of 0.051, 0.036, and 0.027, respectively, at a 5% significance level. However, the study does not provide evidence of a statistically significant association between social disclosure and financial performance. These results provide empirical evidence for regulators and bank managers to shape ESG policies and practices aligning with international standards. AcknowledgmentESG disclosure score of 11 banks as primary data in this study is conducted under the project coordinated by the Fair Finance Vietnam coalition, as part of Fair Finance International.

Peeking into Corporate Greenwashing through the Readability of ESG Disclosures

Faced with the widespread issue of greenwashing, there is a pressing need for an effective approach to assess the extent of corporate involvement in such hypocritical practices. This study aims to address this concern by examining the association between corporate ESG disclosures’ readability and greenwashing. We gauge the readability using a modified Fog Index and construct a company’s peer-relative greenwashing score based on data from third-party databases. The empirical analysis reveals a negative relationship between the level of corporate greenwashing and the readability of its ESG disclosures, suggesting that companies whose ESG disclosures are more readable are less likely to engage in greenwashing. This negative relationship is particularly pronounced in companies characterized by higher levels of information asymmetry. However, the relationship is weaker after 2018, when the “Code of Corporate Governance for Listed Companies” was implemented. In conclusion, our research highlights the significance of ESG disclosure readability in effectively conveying and predicting corporate greenwashing practices. This study provides valuable insights for investors seeking to evaluate corporate performance and make well-informed investment decisions.

Role of environmental, social and governance disclosure in business profitability and cost of debt: An analysis of small Southern Italian agri‐food businesses

AbstractThis article investigates the environmental, social, and governance (ESG) commitment of small agri‐food businesses disclosed by 279 Italians using Thomson Reuters Eikon ESG indicators and its relationship with their financial dimensions, that is, the corporate profitability indexes (ROE and EBITDA) and cost of debt, used as a proxy of the ability to access credit. Findings showed the absence of social reporting and the disclosure of business governance, including sustainability strategy, and the poor reporting of the environmental and social pillars, except for product innovation, product quality, and responsible marketing themes. The capability of ESG disclosure to predict corporate profitability and access to credit is limited. Moreover, investments in product responsibility are negatively related to the cost of debt, while commitment toward the internal and external companies' community appears to predict their ability to access credit positively. In light of the new institutional pressures requiring small agri‐food businesses to change and combine intrinsic and extrinsic motivation for CSR, the study extends the literature on the sustainability of small agri‐food businesses, which is mostly limited, and provides significant practical and political contributions to foster the paradigm shift toward sustainability [EconLit Citations: M21, Q01, Q13].

The Effect of ESG Disclosure, Manager Qualification and Workplace Safety on Firm Value with Firm Size and Financial Leverage as Control Variables In Manufacturing Companies Listed on the Indonesia Stock Exchange year 2020-2022

The purpose of this study, which was designed with firm size and financial leverage acting as control variables, was to ascertain the impact of management qualification, workplace safety, and ESG disclosure on firm value as estimated by Tobin's Q. Manufacturers (mining, metal, and cement) that are listed on the IDX in 2020–2022 make up the study's community. This study employed multiple linear regression-ordinary least squares along with hypothesis testing, where the regression coefficient is tested using the t test. The findings show that Manager Qualification (MQ) has a significant positive impact on Firm Value (FV), Financial Leverage (FL) has a substantial negative impact on Firm Value (FV). While ESG disclosure, Workplace Safety (WS) and Firm Size (FS) have no substantial influence on Firm Value (FV). The variable that has the highest significant level (0.008 < 0.005) but the coefficient is negative is Financial Leverage (FL) due to the calculated t value of -2.71, followed by the Manager Qualification (MQ) variable with a significant level (0.023 < 0.05) with a positive coefficient. And followed by the Firm Size (FS) variable, the Workplace Safety (WS) variable, and ESG disclosure does not have a substantial impact because the coefficient value obtained is 0.116; 0.196; and 0.451, respectively, where the coefficient value is higher than 0.05. The outcomes demonstrated that Firm Value (FV) increases along with the increase in Manager Qualification (MQ) and Financial Leverage (FL) has a substantial negative impact on Firm Value (FV). While Firm Size (FS), Workplace Safety (WS), and ESG disclosure variables have no significant effect.

Does ESG disclosure really influence the firm performance? Evidence from India

In this paper, we examine the influence of ESG disclosure scores on firm performance of companies listed in the National Stock Exchange (NSE). The study uses 167 sample firms from 2010 to 2020. We capitalise overall ESG disclosure scores taken as a proxy to measure the effect of sustainability disclosure on firm performance. Further, we consider the return on assets (ROA), return on equity (ROE), Tobin’s Q, and Price Earnings ratio (P/E ratio) as firm performance measures. We employ dynamic panel data regression analysis to examine the influence of ESG disclosures on performance of the firm. In order, to address the endogeneity issues, we apply Generalised Method of Moments (GMM) model. The study results show a positive relationship between ESG disclosure and firm performance. It suggests that companies’ desire to enhance their performance need to pay more attention towards sustainability disclosures.

How do board characteristics influence the ESG disclosure in Indonesia?

Our study investigates the influence of board characteristics on ESG disclosure for companies listed on the Indonesia Stock Exchange listed from to 2018-2022. This study analyzes independent board members, board size, gender diversity, and audit committee independence as determinants of ESG disclosure in Indonesia’s public companies. The data were derived from Thompson Reuters and multiple linear regression was used to test the effects. The results showed that gender diversity was the only factor that was not significant. Independent commissionaires and board size positively affect ESG disclosure. Meanwhile, audit committee independence negatively and significantly affects ESG disclosure. Although ESG disclosure practices are still uncommon in Indonesia, the importance of board characteristics can be determined based on the results.

ESG performance and disclosure quality: does a well-balanced board of directors matter when impression management occurs?

PurposeThis paper explores how the disclosure quality, measured by the abnormal tone of environmental and social report, may determine the environmental, social and corporate governance (ESG) performance of the firm. This study also investigates the impact of the moderator “board of directors” to explore the extent to which a well-balanced board of directors may affect this association within an impression management strategy.Design/methodology/approachThis work uses a sample of 616 firm-year observations using a sample of French firms indexed on SBF120 index from 2010 to 2017. To test the developed hypotheses, the GLS regression is applied and to control for endogeneity issue and sample selection bias, the authors used, respectively, the two stage least square (2SLS) procedure and the Heckman model.FindingsFindings suggest that a well-balanced board of directors moderates the relationship between the ESG performance and the disclosure quality. The positive effect of abnormal tone management on ESG is weakened by the presence of a good structure of the board, attenuating impression management initiatives.Research limitations/implicationsThe research provides evidence of the impact of corporate social responsibility (CSR) reporting quality, in particular disclosure tone management, on the level of ESG performance in the French context. As the board of directors may have a major impact on weakening impression management strategies in particular tone management practices, in order to improve CSR report quality, the authors recommend French companies to ensure a well-balanced board of directors.Originality/valueThis study helps investors to comprehensively evaluate the information disclosed on CSR reports. It unveils that a strong board composition induces better quality of CSR report and brings better ESG performance. Thus, the study results point to the importance of a well-balanced board of directors and the regulation of the narrative disclosure of CSR information.

Unveiling the Impacts of Corporate Environmental, Social, and Governance Disclosure

Amidst heightened scrutiny of corporate environmental, social, and governance (ESG) practices, this study employs threshold techniques combined with artificial neural networks to examine the impact of ESG disclosure on companies, emphasizing its pivotal role in promoting sustainability. Analyzing data from Taiwan’s 20 industries from 2012 to 2022, it finds that while ESG engagement positively influences financial performance, it also underscores the vital connection between corporate practices and sustainable development. This analysis explores the relationship between carbon emissions, operating expenses, and financial performance in the overall sample and a threshold sample based on a threshold variable. In the overall sample, carbon emissions significantly increase operating expenses, accompanied by other influential variables. Introducing a threshold value of firm size alters the dynamics, showing a positive and more pronounced impact in the threshold sample. The examination of financial performance metrics reveals significant positive associations with carbon emissions, particularly when the threshold is not met or exceeded. Intriguingly, subgroup analysis indicates a negative association between carbon emissions and financial performance within the larger-size subgroup, in stark contrast to a more pronounced positive relationship observed in the smaller-size subgroup. Furthermore, the developed ANN model exhibits robust learning capabilities, underscoring its efficacy in capturing complex patterns within the data. It suggests its potential as a reliable tool for accurately predicting carbon emissions across diverse scenarios, facilitating informed decision-making and policy formulation to mitigate environmental impact.

The cooperative ESG disclosure index: an empirical approach

AbstractGrowing concern about Environmental, Social, and Governance (ESG) performance is pushing businesses, including social economy enterprises such as cooperatives, to seek solutions for Sustainable Development (SD) challenges. This study explores the current landscape of ESG reporting by Spanish cooperatives, adding to the limited knowledge about their sustainability disclosure practices. We propose a specific framework for these entities based on non-financial indicators as a preliminary step to develop an index for ESG reporting, the Cooperative ESG Reporting Index (COOPESG). In terms of methodology, the first step is to create an ad hoc database of primary data sourced through the analysis of cooperative websites. Then, by reviewing the indicators reported by these companies, these primary data are then used to develop an index. Our findings show that only half of the sampled cooperatives have a specific section on their website for ESG reporting. Regarding formats, Codes of Ethics were the most frequent type of report used, followed by the publication of information on SDGs. In terms of content disclosed, the social and governance blocks stand out, while the least information is disclosed on the economic and environmental blocks. Furthermore, there is evidence of a size and sector effect on the disclosed content. All this provides valuable insights for scholars and practitioners alike. Thus, the main practical contribution of this paper for cooperative managers is that it supports the effective disclosure of ESG in line with prevailing good practice, addressing emerging social regulation in the context of the European Union. Also, for academia this study offers a practical breakthrough in the analysis of this subject, helping to fill the gap on cooperatives found in the ESG reporting literature and setting a new research agenda.

Trends and patterns in ESG research: A bibliometric odyssey and research agenda

AbstractThe paper provides a detailed analysis of the ESG literature with the aim of bringing clarity to this area of research and proposing a research agenda. An overview of the development of the literature on ESG pillars is offered through a review of 903 peer‐reviewed articles. The paper identifies four thematic clusters: impacts of ESG disclosure and practices, sustainability, accounting, and responsible investments. The main research streams and sub‐streams for each cluster are discussed, highlighting the most frequent theoretical perspectives and methodologies. Furthermore, the evolution of ESG research across time is delineated. The paper also identifies future research directions within each cluster to advance knowledge, and proposes an integrative framework based on focal themes and their reciprocal connections.

ESG Disclosure, Institutional Investor Preferences and Firm Value

Based on stakeholder theory and signal and reputation theory etc,this paper evaluates the quality level of ESG disclosure of listed companies using Wind ESG score, and introduces the variable of institutional investors' shareholding ratio, selects 2780 listed companies from 2018-2022 as samples, analyses whether institutional investors have ESG investment preferences, and investigates the value of the quality level of ESG disclosure on the value of listed companies' impact mechanism, and further heterogeneity analysis on this basis. The empirical results show that, firstly, improving the quality of ESG information disclosure by listed enterprises in China is conducive to significantly increasing their enterprise value; secondly, institutional investors have ESG investment preferences and attach more importance to the ability of listed enterprises to develop in the long term; thirdly, the proportion of institutional investor shareholding plays a partly intermediary role in the process of the impact of ESG information disclosure quality on the value of the enterprise, i.e., listed enterprises with high-quality ESG disclosure level can attract the attention of institutional investors to the enterprise value. Third, the proportion of institutional investors' shareholding plays a partial mediating role in the process of ESG disclosure quality level affecting enterprise value, i.e., listed firms with high-quality ESG information disclosure can attract institutional investors to increase their shareholding, thus enhancing their enterprise value. Fourthly, the extent to which the quality level of ESG disclosure affects the value of listed firms varies according to the attributes of the firms: there is a significant difference between large-scale and small-scale, highly marketised and low-marketised listed firms; and there is no difference shown between state-owned and non-state-owned, light-pollution and heavy-pollution listed firms, and all of the above conclusions are robust. Accordingly, this paper puts forward recommendations to strengthen the construction of the domestic ESG disclosure and governance system, encourage listed enterprises to practice the concept of ESG responsibility, and develop medium- and long-term institutional investors, aiming to promote listed enterprises to achieve sustainable development, and thus promote the construction of the domestic ESG disclosure system.

ESG disclosure and investment-financing maturity mismatch: Evidence from China

Although the maturity matching theory argues that easing information asymmetry risk contributes to reducing mismatches, the role of non-financial information disclosure in this process remains unclear. This paper investigates the relationship between environmental, social, and governance (ESG) disclosure and the phenomenon of companies using short-term loans for long-term investments. Using data from companies listed in the Chinese Stock Exchanges, we demonstrate that: (1) ESG disclosure effectively reduces the incidence of maturity mismatches, mainly due to improved environmental performance and governance capacity rather than increased social responsibility; (2) There is significant heterogeneity in the effect of ESG disclosure on investment-financing maturity mismatches, which is associated with differences in companies’ ownership structures, innovation capabilities, and financing accessibility; (3) Improvement in company financing capacity, including higher equity liquidity, more optimized debt structure, and lower debt cost, explains the source of ESG’s contributions; (4) Further analysis shows that while the reduction in maturity mismatch risk arising from ESG disclosure improves companies’ productivity and competitiveness, its influence on cross-regional investment and investment efficiency is limited.

Empirical Evidence of ESG Disclosure's Impact on Corporate Investment Decision in Indonesia

The purpose of this study is to investigate the impact of environmental, social, and governance (ESG) disclosure on corporate investment decisions. Data were collected from annual reports of firms listed in Indonesia Stock Exchange between 2015 and 2020 (378 firm-year observations). Using Ordinary Least Square (OLS) and fixed effect estimation, this study found that the dimension of ESG practices positively affects corporate investment decisions. In addition, the presidential election periods increase the effectiveness of corporate investment decisions. The study results reveal that uncertainty in the economic and business environment over the impact of general elections increases the company's ability to generate higher investments. This study contributes to the company strategic alignment to justify management about investment prioritize in the stakeholder wealth through ESG disclosure.

Impact of Environmental, Social and Governance (ESG) disclosure on firm risk: A meta‐analytical review

AbstractWhile the relationship between ESG disclosures and firm risk has been researched substantially, the results remain inconclusive, and contradictory, as of 2023. Through meta‐analysis, we investigate the effect of ESG disclosures measured by studies using E, S, G, or ESG disclosure on firm risk measured as total, systematic, or idiosyncratic risk with a sample of 76 papers published between 1991 and 2023. To the best of our knowledge, this is the pioneering attempt to investigate the impact of ESG disclosure on firm risk by adopting a meta‐analytical procedure to assess the significance of estimated mean effect size followed by meta‐regression analysis to test the effect of potential moderators. E, S, and G disclosures were found to be inversely related to firm risk as proposed by stakeholder and legitimacy theories. Further, the relationship between ESG disclosures and firm risk was found to be more pronounced for idiosyncratic risk rather than systematic risk. Results confirmed that firm size and female participation significantly moderated the relation between ESG disclosures and the level of firm risk. However, R&D, financial flexibility, disclosure index, and ROA had an insignificant but negative impact on the relationship. Our findings provide solace to managers and policymakers who may increasingly invest in ESG activities without worrying as ESG investing results in reducing firm risk. In addition, to manage risk, portfolio managers may include more stocks of environmentally as well as socially responsible firms in their portfolios. Future studies may suggest new moderators in the field of ESG disclosures and firm risk, thereby broadening the theoretical realm. Subsequent studies should examine the influence of specific environmental concerns such as carbon emissions, as well as social concerns such as gender equality and employee compensation, on stock returns. It contributes to the prevailing debate on ESG disclosures and firm risk nexus as well as attempts to shed light on pertinence of moderators affecting the relationship.

THE ROLE OF BUSINESS STRATEGY IN MODERATING THE EFFECT OF ESG PERFORMANCE ON FIRM VALUE

<p><strong>Background</strong>: The sustainability issue has become a global conversation both in society and especially in the business world. Climate change, social crises, and environmental issues pose threats to the global economy, especially for developing countries with weaker infrastructures compared to developed nations, thus necessitating sustainable practices, one of which is through ESG disclosure.</p><p><strong>Objective</strong>: This study aims to empirically examine the influence of ESG performance on firm value with business strategy using Miles & Snow's typology (1978) as a moderator.</p><p><strong>Research Methodology</strong>: This study uses unbalanced panel data regression with fixed effects using robust standard error to prevent bias in testing the formulated hypotheses. The population in this study consists of non-financial sector companies listed on the Indonesia Stock Exchange (BEI) from 2018 to 2022, with a sample of 194 companies. The data collection method utilizes purposive sampling. Data is analyzed using the panel data regression method.</p><p><strong>Research Findings</strong>: The results of this study show that ESG performance has a significant negative impact on firm value. Furthermore, this research finds that business strategy can moderate the relationship between ESG performance and firm value, where it strengthens the negative relationship between ESG and firm value. Additional analysis reveals that the defender strategy weakens the negative relationship between ESG and firm value. Meanwhile, the other two strategies are unable to moderate the relationship between ESG and firm value.</p><p><strong>Originality/Novelty of Research</strong>: This is a study examining the influence of ESG on firm value with business strategy as a moderator in the non-financial sector companies in Indonesia listed on the BEI using data from 2018 to 2022</p>