Demystifying the relationship between ESG and SDG performance: Study of emerging economies

  • Received February 18, 2023;
    Accepted June 14, 2023;
    Published July 3, 2023
  • Author(s)
  • DOI
    http://dx.doi.org/10.21511/imfi.20(3).2023.01
  • Article Info
    Volume 20 2023, Issue #3, pp. 1-12
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This work is licensed under a Creative Commons Attribution 4.0 International License

Companies and investors in emerging markets have started paying attention to ESG (Environmental, Social, and Governance) issues. There has been a growing demand for aligning ESG disclosure of companies to UN SDGs (United Nations Sustainable Development Goals), so understanding how the firm-level ESG affects the country-level SDG is very important for evaluating the advances in ESG and SDG implementation in emerging markets. This study examines the linkage between firm-level ESG disclosures and their relationship with country-level SDG scores over ten years for three emerging countries: India, China, and Brazil. The analysis of 1,500 top-listed firms in these countries reveals an increasing trend of firms going for ESG disclosures and increased ESG scores over the years in the three markets. Out of the total sample, almost 75% of firms make ESG disclosures in Brazil, followed by 54% in India and 32% in China. Additionally, companies in all these countries tend to emphasize governance-related disclosures more, with Brazil having higher ESG disclosures than India and China. The correlation and causality tests indicate a significant positive correlation between mean ESG scores and country-specific SDG scores. The Dumitrescu-Hurlin panel causality tests provide stronger linkages between firm-specific Environment scores and SDG scores, indicating that a firm’s environment disclosures translate into higher SDG scores. However, the same is not valid for Social and Governance factors. These findings have important implications given the global attention on the linkages between ESG disclosure and SDG score.

Acknowledgments
The financial and infrastructure support provided by FORE School of Management, New Delhi in completing this paper is gratefully acknowledged.

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    • Figure 1. Percentage of firms making ESG disclosures
    • Figure 2. Percentage of firms making Environment disclosures
    • Figure 3. Percentage of firms making Social disclosures
    • Figure 4. Percentage of firms making Governance disclosures
    • Figure 5. Average ESG scores of sample firms in three countries (2010–2019)
    • Figure 6. Average Environment score of sample firms in three countries (2010–2019)
    • Figure 7. Average Social score of sample firms in three countries (2010–2019)
    • Figure 8. Average Governance score of sample firms in three countries (2010–2019)
    • Figure 9. ESG coefficient of variation of sample firms in three countries (2010–2019)
    • Table 1. Correlation between ESG and SDG (scores)
    • Table 2. Pairwise Dumitrescu-Hurlin panel causality tests
    • Conceptualization
      Tarun Kumar Soni
    • Data curation
      Tarun Kumar Soni
    • Formal Analysis
      Tarun Kumar Soni
    • Investigation
      Tarun Kumar Soni
    • Methodology
      Tarun Kumar Soni
    • Software
      Tarun Kumar Soni
    • Supervision
      Tarun Kumar Soni
    • Validation
      Tarun Kumar Soni
    • Visualization
      Tarun Kumar Soni
    • Writing – original draft
      Tarun Kumar Soni
    • Writing – review & editing
      Tarun Kumar Soni