Impact of ESG factors on firm risk in Europe

Technology empowerment: Digital transformation and enterprise ESG performance-Evidence from China's manufacturing sector

In light of the long-term constraints posed by the "dual carbon" objective, can digital technology emerge as a transformative solution for enterprises to embark on a sustainable development trajectory? The existing body of research has yet to reach a consensus. In order to shed further light on the intricate relationship between digital transformation and ESG performance of enterprises, this study empirically examines the mechanisms and boundaries through which digital transformation influences ESG performance, based on observational data from A-share manufacturing listed companies in Shanghai Stock Exchange and Shenzhen Stock Exchange spanning from 2011 to 2021. The findings demonstrate that digital transformation exerts a significant positive impact on the ESG performance of manufacturing enterprises. Mechanism analysis reveals that the enabling effect of digital transformation primarily enhances company transparency, thereby fostering continuous improvements in ESG performance among manufacturing enterprises. The performance expectation gap will give rise to the phenomenon of "stop-loss in time" and impede the promotional impact of digital transformation. Further investigation into industrial characteristics and industry competition intensity indicates that state-owned enterprises and those operating within highly competitive environments experience more pronounced effects of digital transformation on their ESG performance. This study expands the mechanism and boundary of digital transformation on ESG performance of manufacturing enterprises, and provides a new perspective for manufacturing enterprises to realize the collaborative transformation of digital and green.

Do disclosure of ESG information policies inhibit the value of heavily polluting Enterprises?-Evidence from China

Green governance and high-quality green development are crucial to the growth of enterprises; therefore, this paper examines how environmental, social, and corporate governance (ESG) disclosure policies affect the value of heavily polluting companies. The study's data is from the new version of the Governance Guidelines for Public Companies promulgated by the China Securities Regulatory Commission in 2018. Thus, the data of China's public companies from 2011 to 2021 is used for the study's analysis. The methods applied for our estimation analysis are the differences-in-differences (DID) and the mediation effect model. The findings depict that ESG information disclosure policies can significantly inhibit the corporate value of heavily polluting enterprises (HPE). Enterprise technological innovation plays a mediating effect in this mechanism; that is, after introducing the policy, it effectively alleviates the information asymmetry and promotes enterprise technological innovation, but it also damages the enterprise value. Further analysis shows that the inhibition effect of ESG information disclosure policy on the value of HPE is heterogeneous, and for non-state-owned enterprises, ESG information disclosure policies have a stronger inhibitory effect. Also, there is little difference between the central and western regions and the eastern region in terms of the inhibitory effect of ESG disclosure policies on the value of HPE. The conclusion of this paper is conducive to improving the information disclosure policy of listed companies and promoting the green development of enterprises.

The Influence of Environmental, Social, and Governance (ESG) Practices on US Firms’ Performance: Evidence from the Coronavirus Crisis

This study explores the influence of total and individual ESG practices and the coronavirus crisis on US firm performance (FP). A large and recent sample of 406 US firms that adopted ESG issues during 2016–2020 was used. This study uses the generalized least-squares (GLS) regression estimator, the dynamic analysis technique, and robustness tests. The results indicate that firms with heightened ESG practices have better performance measures. In most cases, the results suggest that firms with heightened environmental, social, and governance performances have better performance measures. The results suggest that the coronavirus crisis negatively affected FP measures. In addition, the analyses of the differences suggest significant distinctions in FP due to the coronavirus crisis. This study’s findings have important implications for stakeholders. Managers could benefit from the results of this examination by recognizing the status of ESG practices and FP before and during the coronavirus crisis and identifying the linkage between the fulfillment of ESG responsibilities and FP. This study provides noteworthy practical implications that could enable managers to develop strategies and policies for adopting and enhancing ESG practices to achieve the best performance. Furthermore, the results could influence trading processes as investors and financiers pursue attractive financial returns from investments in businesses concerned with ESG issues.

The Influence of ESG Ratings On Idiosyncratic Stock Risk: The Unrated, the Good, the Bad, and the Sinners

This study analyzes whether stocks of companies with environmental social governance (ESG) rating show lower idiosyncratic risk. The main analysis covers 898,757 company-month observations of US stocks in the period from 1991 to 2018 and controls for stocks' exposure to liquidity, mispricing, innovations in volatility risk, investor sentiment, and analysts' forecast divergence. The main finding is that the receipt of an ESG rating decreases idiosyncratic stock risk. The effect is stronger for stocks that receive a higher ESG rating. Nevertheless, even when companies receive a lower ESG rating, they show significantly lower idiosyncratic risk than stocks without an ESG rating. Furthermore, stocks subject to a negative screen show lower idiosyncratic risk during recessions than comparable stocks with an ESG rating but without a negative screen. The results support the notion that the receipt of an ESG rating decreases uncertainty regarding future stock risk and return and show that ESG ratings and negative screens individually influence stock risk and, therefore, should be considered separately.

Environmental-, social-, and governance-related factors for business investment and sustainability: a scientometric review of global trends

Consideration of environmental, social, and governance (ESG) factors can contribute to the environmental and economic performance of organizations in terms of investment and sustainability. This article thoroughly reviews the following factors influencing decisions regarding ESG policy by businesses: economic performance, environmental sustainability, pollution and waste, corporate social responsibility, gender, and governance structure. Moreover, we review the impact of these factors considering ESG disclosure, the global pandemic, religion, governing board and size, national interest, and technological advancements. The literature reports that ESG disclosures of environmental, economic, and social sustainability performance can strengthen business sustainability and performance. Religion-based businesses demonstrated better socio-environmental performance but not governance. An independent governing board has a positive impact; however, dual-gender boards negatively impact ESG disclosure. Significant diversification potential in ESG investments was observed during the COVID-19 pandemic. Adopting an ESG policy enhances the innovation capacity, innovative activities, value creation, and financial performance of businesses. Overall, the social and environmental performance demonstrated a significantly positive relationship with business sustainability, indicating that business economy and creating value for society are mutually dependent. The literature summary presented in this review will help future research on ESG factors that influence business investments and sustainability.

Government Environmental Regulation and Corporate ESG Performance: Evidence from Natural Resource Accountability Audits in China

With the increasing global concern for the ecological environment and sustainable development, all countries have proposed environmental regulatory policies to improve the quality of their ecological environments. China has also proposed an environmental regulation policy: Leading an officials' accountability audit of natural resources (AANR). As the main subject of consuming resources, the sustainability of enterprises has become a focus of all parties. The Environmental, Social, and Governance (ESG) metric measures corporate sustainability. As a result, companies' ESG performance has gained the community's attention. Based on data from Chinese A-share listed companies in Shanghai and Shenzhen from 2011 to 2019, this study investigates the role of AANR on the ESG performance of companies via the difference-in-differences (DID) method. This study found that implementing the AANR pilot significantly negatively impacted corporate ESG performance. This result was found to remain robust after passing parallel trend and robustness tests. Further research found that the AANR differed significantly across corporate ownership and regions in corporate ESG performance. First, pilot implementation had a more significant impact on the ESG performance of non-state enterprises. Second, the differences across regions showed that the central region had the most significant impact, followed by the western region, while the eastern region had the most negligible impact. This study will help government departments improve the AANR system and enable companies to focus on their ESG performance.

Effects of ESG Activity Recognition Factors on Innovative Organization Culture, Job Crafting, and Job Performance

This study aims to verify the effects of organizational members’ ESG activity recognition on job performance with the mediation of innovative organizational culture and job crafting. To this end, a questionnaire survey was carried out based on previous studies, and 237 questionnaire response copies were analyzed. An empirical study was conducted on the effects of each ESG activity recognition factor on job performance with the mediation of innovative organizational culture and job crafting. According to the analysis result, the society factor had a positive (+) effect on innovation-oriented culture among the ESG activity recognition factors, the environment factor had a negative (−) effect, and the governance factor did not have any effect. In contrast, governance had a positive (+) effect on relationship-oriented culture in innovative organizational culture. However, the environment and societal factors did not have any effect. The innovation-oriented culture and relationship-oriented culture directly affected job crafting, but they were confirmed not to have a direct effect on job performance. Hence, the result shows that the ESG activity recognition’s society factor reinforces innovative organizational culture, and the governance factor can consolidate organizational relationships.

Examining impact of ESG score on financial performance of healthcare companies

Purpose

This paper aims to investigate the effect of total and each individual component of environmental, social and governance score (ESG) on financial performance (FP) of healthcare companies.

Design/methodology/approach

Data for 468 health-care firms for the business year 2020 is sourced from Thomson Reuters to obtain ESG data. Correlation and multivariate regression analysis are done to investigate the relation between ESG activities and firm performance. The analysis has been done on overall data and subsample data to examine the relation across developing vs developed markets.

Findings

The results of the study suggest that relation between ESG score and FP cannot be generalized. The results show that performing ESG activities positively impact firm performance of healthcare companies in developed economies; however, this relationship would be negative or insignificant in the case of developing economies.

Practical implications

The results of this study have implications for both practitioners and policymakers. The authors suggest the specific setups in which the relationship between ESG activities and firm performance will be negative or insignificant. These results are beneficial to policymakers who seek to increase the active participation of firms in ESG activities.

Originality/value

To the best of the authors’ knowledge, this study is the first to explore the relationship of ESG score on FP through the lens of country-level development variables for health-care sector companies.

The Effects of ESG Activity Recognition of Corporate Employees on Job Performance: The Case of South Korea

Corporate environment, society, and governance (ESG) management activities have recently been consolidated in the business ecosystem, and many firms are considering their employees’ recognition and job changes according to organizational ESG strategy. This study aims to verify the effects of ESG activity recognition of corporate employees on job performance by mediating change support behavior, innovative organization culture, and job crafting. This study designs a structural equation model with a hypotheses based on previous studies. A questionnaire survey was carried out targeting large Korean manufacturing companies, and an analysis of 329 response copies was performed. As a result, ESG activity recognition did not directly affect job crafting, but it affected job crafting with the mediation of innovative organizational culture and change support behavior. ESG activity recognition also positively affected job crafting and job performance by mediating change support behavior and an innovative organization culture. Hence, the research shows that an innovative culture and change support behavior within an organization should be considered to improve ESG management performance.

ESG performance and stock prices: evidence from the COVID-19 outbreak in China

This paper investigates the role of environmental, social, and governance (ESG) performance in stock prices during the market financial crisis caused by the COVID-19 pandemic. We use the Chinese listed company data as the bases for adopting an event-study method to identify the impact of ESG performance on cumulative abnormal returns. Empirical results suggest that ESG performance significantly increases firms' cumulative abnormal returns and has asymmetric effects during the pandemic. Our results are robust to various robustness checks that consider the replacement of event window period, ESG measurement, adding other control variables, and sample exclusion of Hubei Province. We further find that reputation and insurance effects are important mechanisms through which ESG performance influences stock prices. Lastly, heterogeneous analyses show that ESG effects are considerably pronounced among firms with low human capital and bad image and in high-impact regions.

Green Credit Policy and Investment Decisions: Evidence from China

Previous studies have reported mixed results on the effect of the green credit policy on firms’ behaviors. Investment decision making is one of the most important elements of firms’ behaviors, but few studies have discussed the relationship between the green credit policy and firms’ investment decisions. Therefore, this paper explores the effect of green credit policy on firms’ investment decisions. Using Chinese listed firms from 2008 to 2020, we found that the green credit policy tended to reduce pollutant-emitting firms’ investment level but increases pollutant-emitting firms’ investment efficiency; this effect was more pronounced in state-owned firms, firms with high-quality corporate governance, and those with a higher analyst following. This paper contributes to the literature on the economic consequences of the green credit policy and can help commercial banks and other financial institutions allocate green credits more effectively.

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

Purpose

The purpose of this paper is to investigate the effects of women on board moderated by firms’ competitive advantage on firms’ environmental, social and governance (ESG) disclosures.

Design/methodology/approach

The sample consists of 332 firm-year observations from the year 2012 to 2017 of 65 firms listed in Bursa Malaysia. To improve the robustness of this analysis, the authors adopt clustering techniques in the regression analysis. Sensitivity analysis is also conducted using two-stage least square regression and robust standard errors for panel regression with a cross-sectional dependence approach.

Findings

The findings of this research indicate that women on board encourage ESG and environmental disclosures. Nonetheless, in competitively advantaged firms, the authors find that the interaction between WOMENPER and COMADVANTAGE is negatively influencing ESG scores. However, no evidence is found to indicate that women on board in a competitively advantaged firm have an effect on the environmental scores of a firm.

Research limitations/implications

The findings urge regulators to ensure the appointment of qualified and competent women on board, particularly in competitively advantage firms.

Practical implications

Though firms with more women on board are associated with better ESG disclosures and environmental disclosures, the author’s additional analysis found that this is less pronounced in competitively advantage firms. Since a number of the competitive firms are owned by family firms as well as government-linked firms, the appointment of women should not be based on directors’ affiliation, network and family relationships.

Originality/value

To the best of authors’ knowledge, this is one of the few studies which seek to investigate women’s appointment in competitive advantage firms.

Corporate Sustainability and Risk Management—The U-Shaped Relationships of Disaggregated ESG Rating Scores and Risk in the German Capital Market

This study addresses the relationship between the (dis)aggregated ESG rating and different types of risk (i.e., market risk, idiosyncratic risk, total risk) in the German stock market. We investigate not only the overall ESG rating and the E, S, and G pillar scores but also all the underlying category scores. Thereby, we provide in-depth insight into diverse CS operations. We cover 454 firm years (2012–2019) using ordinary least squares regression with firm and year fixed effects. Our main insights are the U-shaped relationships between CS and risk: Ecological investments first decrease systematic risk (beta), while overinvestment increases systematic risk again. Likewise, social investments initially decrease idiosyncratic risk, while overinvestment increases idiosyncratic risk again. Further findings suggest only one linkage between systematic risk and the social pillar score. In the category scores, a few more relevant linkages were identified, which indicates that disaggregation of the ESG ratings increases the explanatory power of models. In respect to findings from other capital markets, it appears that the effects of the ESG ratings on risk may depend on the existing level of sustainability in the capital market. Last, our study provides insights into the nonlinearity of the CS–risk relationships.

Environment, Social, and Governance Score and Value Added Impacts on Market Capitalization: A Sectoral-Based Approach

The main goal of this study was to measure the impact of the environmental, social, and governance (ESG) sustainability score and value added to companies’ market capitalization. Therefore, financial and sustainable performance were measured in a sample of 5557 companies divided into 9 economic sectors of activity from 78 countries and 6 regions (Americas: 2144; Asia: 1770; Europe: 1232; Oceania: 311; Africa: 90; United Kingdom: 10). The analyzed sample consisted of publicly traded companies ranked by market capitalization (from small-cap to large-cap), for which the ESG score was measured in the analyzed period: the financial year was 2019, before the advent of the COVID-19 pandemic. Using two methods (multiple linear regression and complementary quantile regression), we found a direct link between the ESG score and value added variables and market capitalization, with distinct impacts at the economic sector level for ESG score and relatively constant impact for value added.

Is ESG Relevant to Electricity Companies during Pandemics? A Case Study on European Firms during COVID-19

The electricity sector was negatively impacted by the coronavirus disease (COVID-19), with considerable declines in consumption in the initial phase. Investors were in turmoil, and stock prices for these companies plummeted. The aim of this paper is to demonstrate the significant negative influence of the pandemic on abnormal returns for the electricity sector, specifically for traditional and renewable companies and the influence of ESG scores, using the event study approach and multi-variate regressions. Our results show that the pandemic indeed had a negative impact on the electricity sector, with renewable electricity companies suffering a sharper decline than traditional ones. Moreover, we find that ESG pillar scores affected electricity companies differently and are sector-specific. For renewable electricity companies, the returns were positively influenced by the environmental ESG scores and negatively by governance ESG scores.

ESG Performance and Stock Price Volatility in Public Health Crisis: Evidence from COVID-19 Pandemic

Unlike traditional financial crises, COVID-19 is a global public health crisis with a significant negative impact on the global economy. Meanwhile, the stock market has been hit hard, and corporate share prices have become more volatile. However, the stock prices of some enterprises with good performance of ESG (Environment, Social, and Governance) are relatively stable in the epidemic. This paper selects ESG rating data from MSCI (Morgan Stanley Capital International) with better differentiation, adopts multiple regression and dummy variables, and adopts the Differences-in-Differences (DID)model with the help of COVID-19, an exogenous event. Empirical test the impact of ESG performance on the company's stock price fluctuations. The results show that the stock price volatility of companies with good ESG performance is lower than that of companies with poor performance. Second, COVID-19 exacerbates volatility in company stock prices, but the increase in stock price volatility of companies with good ESG performance is small. That is, good ESG performance helps reduce the increase in stock price volatility due to COVID-19 shock, and plays a role in enhancing "resilience" and stabilizing stock prices. This paper provides new empirical evidence for the study of ESG performance and corporate stock price volatility, and puts forward relevant policy recommendations for enterprises and government departments.

Climate Risk with Particular Emphasis on the Relationship with Credit-Risk Assessment: What We Learn from Poland

This research seeks to identify non-financial enterprises exposed to the climate risk relating to transition risks and at the same time use of bank loans, as well as to conduct stress tests to take account of the financial risk related to climate change. The workflow through which to determine the ability of the banking sector to assess the potential impact of climate risk entails parts based around economic sector and company level. The procedure based on the sectoral level identifies vulnerable economic sectors (in the Sectoral Module), while the procedure based on company level (the Company Module) refers to scenarios presented in stress tests to estimate the probability of default under stressful conditions related to the introduction of a direct carbon tax. The introduction of the average direct carbon tax (EUR 75/tCO2) in fact results in increased expenditure and reduced sales revenues among enterprises from sectors with a high CO2 impact, with the result being a decrease in the profitability of enterprises, along with a simultaneously higher level of debt; an increase in the probability of default (PD) from 3.6%, at the end of 2020 in the baseline macroeconomic scenario, to between 6.31% and 10.12%; and increased commercial bank capital requirements. Financial institutions should thus use PD under stressful conditions relating to climate risk as suggestions to downgrade under the expert module.

Meta-Frontier Analysis of Disclosing Sustainable Development Information: Evidence from China’s AI Industry

China currently adopts voluntary principles to disclose sustainable development information, and so considerable numbers of listed companies have chosen not to disclose such information. Since disclosure and non-disclosure groups face different production opportunities, this research uses the meta-frontier framework to completely analyze sustainable development practices of China’s artificial intelligence (AI) industry. Empirical results show that the disclosure group outperforms the non-disclosure group in operating scales, efficiencies, and technologies, while the superior efficiency of state-owned enterprises (SOEs) comes entirely from the non-disclosure group. Hence, the government should mandate or actively encourage capable corporations, especially SOEs, to disclose sustainable development information, as doing so improves the overall sustainable development of society and also enhances these firms’ performance. Finally, the authority can formulate a nationwide disclosure policy regardless of the existing differences in regional development.

Corporate social performance and over-investment: evidence from Germany

Purpose

With the Green Deal and Sustainable Finance Taxonomy, the European Union is driving forward its ambition for a modern, resource-efficient and competitive economy. For this reason, this paper contributes to the ongoing discussion by examining how overall corporate social performance (CSP) and the respective environmental, social and governance (ESG) pillar performance affects corporate financial performance (CFP). In addition, this study aims to present novel insights by testing a theoretically derived CSP over-investment theory empirically for the German market.

Design/methodology/approach

The final sample includes firms listed on the German Prime Standard (DAX30, MDAX and TecDAX) from 2015 to 2019. The study includes a correlation and regression analysis using fixed effects on 363 firm-year observations to investigate the CSP-CFP relationship. This paper applies accounting and market-based CFP measures and uses Thomson Reuters (TR) ESG scores to measure CSP.

Findings

Overall CSP, social pillar and governance pillar performance improve CFP for firms listed on the German Prime Standard. However, the study provides evidence for a value-destroying effect of CSP over-investment in the social pillar.

Research limitations/implications

The implications of the study are ambiguous. First, firms can improve CFP when doing good, i.e. increase CSP. Second, however, CSP is a concept of decreasing marginal benefits. Consequently, managers can respond to increasing pressure from investors to be “sustainable” with the argument of CSP over-investment. Policymakers must consider materiality as a potential explanation for the over-investment phenomena when framing sustainable development programs, i.e. the EU Green Deal and regulations such as the Directive 2014/95/EU and the Regulation EU 2020/852. Moreover, the study sensitizes society that sustainability efforts do not exclusively affect CFP positively.

Originality/value

The paper contributes to CSP literature by revisiting the CSP-CFP relationship and debuting a CSP over-investment hypothesis on the German market. The results are highly relevant for practitioners, policymakers and society, as the study provides an empirical framework to evaluate CSP properly and reveals the importance of materiality in stakeholder management.

An empirical analysis: Did green supply chain management alleviate the effects of COVID-19?

Supply chain management played a central role during the COVID-19 crisis, as the outbreak of the pandemic disrupted the majority of all global supply chains. This paper tests whether companies that use green supply chain management (GSCM) practices benefited from a buffer effect in the context of COVID-19. Our empirical analysis, conducted on a sample of U.S. companies, shows that GSCM companies experienced less negative abnormal stock returns during the crisis. This result contributes to the literature on financial impact of GSCM, finding that GSCM is perceived as an effective risk management tool and can serve as an effective drug against COVID-19 crisis. Our paper also contributes to the business debate on the role of green supply chains in the post-COVID19 world.

Mapping and Clustering Analysis on Environmental, Social and Governance Field a Bibliometric Analysis Using Scopus

Academic interest in ESG has grown significantly in recent years. Nevertheless, bibliometric and visualization research on this topic is still insufficient. This study aims to conduct publication metrics on the literature connected with ESG and attempt to give a research agenda for future research. In this study, we used data from the Scopus database. Various bibliometric techniques, such as bibliographic coupling and co-occurrence analysis, were combined with assorted themes to present an overview. To the best of our knowledge, there is no study that analyses the bibliographic data on ESG fields; this study is a unique contribution to the literature. This study also provides an overview of the trends and trajectories with a visual and schematic frame for the research of this topic. This may help researchers understand the current trends and future research directions, and enable future authors to conduct their studies more effectively.

Influence of ESGC Indicators on Financial Performance of Listed Pharmaceutical Companies

The pharmaceutical industry, concerned about the impact of its activity, has integrated responsible principles and practices with a view to improving its sustainable and financial performance. This study analyzes the relationship between environmental, social, governance, and controversy indicators and financial performance, measured through return on equity (ROA), return on assets (ROE), and Tobin’s Q, which are applied to the listed companies in the Nasdaq US Smart Pharmaceuticals Index. This index is composed of 30 international companies with a presence at the global level. All the data have been extracted from the Thomson Reuters database. The analysis was performed using structural equation modeling implemented with partial least squares. The results confirm the positive relationship between the construct composed of environmental, social, and governance (ESG) indicators and the aforementioned financial ratios. Additionally, a positive relationship of the controversy indicator with Tobin’s Q is supported. This suggests that the pharmaceutical multinationals focus their investments in sustainability on ESG and pay attention to controversies to boost the visibility of the company and thus increase its value. These conclusions confirm that investing in ESG is a profitable strategy. It is also relevant for managers as it increases the profits and the market value of multinational pharmaceutical companies.

An Analysis on the NASDAQ’s Potential for Sustainable Investment Practices during the Financial Shock from COVID-19

There is a growing demand for sustainable business practices and for sustainable and impact investment as has been signaled by the Sustainable Development Goals ratified by all the United Nations members. However, there is not that much evidence on how sustainable investments perform during crises compared to regular investments. This paper investigates if sustainable investments within the NASDAQ have a lower volatility rate when reacting to a significant global crisis such as the COVID-19 pandemic. It groups the shares of businesses with Corporate Social Responsibility (CSR) practices that are ranked 70% or higher given by CSRHub, Inc. and compares it to business shares with the lowest-ranked CSR business practices at 30% or lower. The top 30% and bottom 30% CSR stocks’ volatility will be predicted using variations of the GARCH model. The top 30% CSR stocks of the NASDAQ had a lower rate of volatility for a global crisis than the bottom 30% CSR stocks. Technology is the only sector whose top 30% showed higher volatility. However, the top 30% of companies in the Health Care and Utilities sectors show a higher increase in returns and a lower drop in returns. These results signal the higher uncertainty associated with some cutting-edge products and services offered by the top 30% of technology companies and the preference for more established companies that offer higher quality services when it comes to satisfying basic needs such as health and utilities in difficult times.

The Nonlinear Relation between Institutional Ownership and Environmental, Social and Governance Performance in Emerging Countries

This paper examines how the level of institutional ownership affects environmental, social, and governance (ESG) performance in emerging countries by jointly investigating a nonlinear relationship. By examining an international sample composed of 17,318 firm–year observations from the period 2012–18 for 16 emerging countries, our findings reveal that the ESG performance of firms located in emerging countries depends on the level of influential institutional ownership, and displays a U-shaped relation, particularly for environmental disclosure. Institutional investors with low ownership are less likely to promote higher ESG performance in emerging countries, although this effect is attenuated when institutional ownership reaches a significant percentage, constituting a critical mass.

Environmental, Social, Governance Activities and Firm Performance: Evidence from China

Increasingly noticeable environmental and risk problems have made more and more companies and regulatory agencies realize the importance of environmental, social, and governance (ESG) activities. However, on the question that whether ESG activities have promoted or reduced firm performance, there is still no consensus. Especially for China, a representative country in emerging markets whose corporate ESG activities are still in their infancy and related systems and regulatory measures not complete, its theoretical and practical circles more urgently need to know an accurate answer to this question. Therefore, this article takes China’s Shanghai and Shenzhen A-share listed companies that have ESG rating data from 2015 to 2019 as samples and finds that corporate ESG activities have a significantly negative impact on firm performance. Further research finds that compared with state-owned enterprises and environmentally sensitive enterprises, non-state-owned enterprises and non-environmentally sensitive enterprises provide stronger evidence to support the above conclusions.

The Role of Environmental, Social, and Governance Disclosure in Financial Transparency

In today’s business environment, corporate governance and financial transparency have an impact on the performance of firms. These changes are important for understanding the widespread accessibility of relevant and reliable information regarding an entity’s financial and nonfinancial aspects. The purpose of this study was to show how the environmental, social, and governance disclosure performance of companies has gained a reputation of having a fundamental role in financial transparency and how it varies by stakeholder orientation and economic sector. In this regard, we developed a new model based on stakeholders’ perceptions to analyze the impact of environmental, social, and governance disclosure on financial transparency using the Analytic Hierarchy Process (AHP) method and select the economic sector that ensures transparency in sustainable and financial reporting. This model was applied over the 2008–2018 period to 143 companies from eight countries in the most representative economic sectors: finance, energy, and telecommunication services. Our results portray that environmental, social, and governance reporting are a company’s means of communication with stakeholders, as part of their accountability and stewardship obligations, and at the same time, they are a tool for achieving transparency regarding the financial performance of a firm. Furthermore, our findings also showed whether environmental, social, and governance (ESG) disclosures act as a vector of financial communication for enterprises, and this relationship will also be evident in their role in financial transparency.

Detecting Green-Washing or Substantial Organizational Communication: A Model for Testing Two-Way Interaction Between Risk and Sustainability Reporting

This paper contributes to the expanding landscape of methodological approaches and tools for investigating organizational sustainability communication. Our method allows for exploring two-way interactions between company risk and sustainability reporting. We present a basic but extendable method, while using only publicly available data. Our method adds additional features to established methods: It covers only risk (not returns), as theory mainly supports risk-reporting relationships and not return-reporting relationships. It tests for reverse causality of the risk-reporting relationship and links complementary explanations to different theoretical schools. Our method tests the model by employing data from a market with mandatory sustainability reporting to avoid self-selection bias.

Mapping the ESG Behavior of European Companies. A Holistic Kohonen Approach

In the context of increased awareness for complying with the multiple requirements for sustainable development, the stakeholders need to have the proper information for analyzing the corporate behaviors from various perspectives. Thus, the purpose of this research is to investigate and map the sustainability patterns of European companies at the beginning of 2019, in order to uncover valuable insights into the corporate sustainable behaviors. The Environmental, Social and Governance (ESG) performances of 1165 European companies were considered by applying the Kohonen neural network for clustering purposes at three main levels: (1) ESG overall level, including country and sectoral perspectives; (2) ESG thematic level; (3) ESG four-folded innovative level (stakeholder, perspective, management level and focus views). All three analyses carried out show a three-clustering solution—Lower, Middle and Higher ESG clusters. Most firms are top ESG performers and the companies with good ESG scores also have more related controversies. The results highlight the sustainability profiles of the examined companies. Firstly, the environmental and social priorities are preferred over corporate governance targets. Secondly, companies tend to implement a business-customized ESG approach for achieving organizational efficiency and competitiveness. Thirdly, there is a higher consideration of employees, external-directed measures, operational issues and process-orientation in the corporate ESG performance and development. The ESG approach of the European reporting companies is mainly mature, strategic and long-term oriented, aimed to increase the corporate competitiveness and to support the societal well-being altogether.

ESG and Corporate Financial Performance: Empirical Evidence from China’s Listed Power Generation Companies

Nowadays, listed companies around the world are shifting from short-term goals of maximizing profits to long-term sustainable environmental, social, and governance (ESG) goals. People have come to realize that ESG has become an important source of the corporate risk and may affect the company’s financial performance and profitability. Recent research shows that good ESG performance could improve the financial performance in some countries. Yet, the question of “how does ESG affect financial performance” has not been thoroughly discussed and studied in China. In this article, we study China’s listed power generation groups to explore the relationship between ESG performance and financial indicators in the energy power market based on the panel regression model. The results show that good ESG performance can indeed improve financial performance, which has significant meanings for investors, company management, decisionmakers, and industry regulators.