Factors Affecting ESG towards Impact on Investment: A Structural Approach

Stakeholders' perspectives on critical success factors for environmental social and governance (ESG) implementation

Environmental Social and Governance (ESG) has emerged as a sensitive issue, attracting the attention of a large audience that could not be ignored. Government bodies continue to pass regulations mandating organizations to comply with ESG principles. However, many organizations have had unsatisfactory results while promoting sustainability ideals due to various challenges. To achieve ESG goals, the present study offers a thorough framework for ESG implementation across organizations based on the critical success factor (CSF) theory and the opinions of diverse stakeholders. Following a literature review and brainstorming with ESG experts and academicians, a survey questionnaire was sent to 400 respondents to evaluate the 20 factors identified as 'super-set' CSFs for ESG implementation. This paper represents a novel attempt in ESG research as it conducts a survey supported by exploratory factor analysis (EFA). The interactions between the significant CSFs were studied by employing total interpretative structural modeling (TISM) and fuzzy MICMAC approach. ESG implementation is found to be highly driven by firm characteristics, earnings quality, and environmental performance, which can be argued to be the fundamental determinants of ESG implementation. According to these findings, organizations' leadership should (1) focus on effectively structuring firms' attributes to swiftly operate the ESG implementation framework, (2) ensure consistent business earnings that signal improved future performance, and (3) continuously monitor and assess their environmental performance. These efforts should be supported by engaging with diverse stakeholder groups, each playing its respective role in ESG implementation. Consequently, ESG implementation across organizations is anticipated to accelerate with thoughtful organizational coordination, strategic planning, and compliance with authoritative policies. However, rather than solely focusing on creating ESG disclosure laws, policymakers should also focus on creating better ESG outcomes through effective ESG implementation. Therefore, this research offers valuable insights into improving ESG practices, which facilitates the adoption of mandatory ESG disclosure regulations.

Shifting focus from end-of-pipe treatment to source control: ESG ratings' impact on corporate green innovation

This study actively explores the pivotal role of environment, society, and governance (ESG) ratings in optimizing corporate green innovation activities as a robust response to ongoing ESG investment divestment. It provides empirical support for implementing corporate green transitions, establishing, and refining market-driven green development framework, and attaining "carbon peaking, carbon neutrality" targets. Furthermore, the research represents a groundbreaking effort to assess the influence of ESG ratings on corporate green innovation with a specific focus on pollution disposal. Specifically, examining data from Chinese A-share listed companies spanning 2011 to 2020, this study utilizes various models, including multi-period difference-in-differences (DID), event study, staggered DID, and synthetic DID (SDID). The ensuing analysis reveals that ESG ratings significantly impact the development of corporate green innovation, catalyzing the transformation of green innovation activities from end-of-pipe to source control. Notably, ESG ratings achieve this transformation by mitigating managerial myopia, enhancing the research and development (R&D) staff ratio, and alleviating financial constraints. However, the study also identifies institutional constraints and corporate digitalization as factors leading to heterogeneous effects on green innovation and its direction. These findings not only provide enhanced theoretical support but also offer empirical validation for corporations and governments looking to implement and generalize ESG ratings, facilitating a successful green transition.

The Impact Factors of Industry 4.0 on ESG in the Energy Sector

Digital transformation refers to highly thought-out social, manufacturing, and organizational transitions driven by digital revolutions and emerging technologies. On the other hand, energy is a critical pillar of the economic growth of the country. Meanwhile, global interest in environmental, social, and governance (ESG) investment is growing. The conventional investment paradigm is being phased out in favor of investments that prioritize environmental, social, and corporate responsibility. The energy sector is one of the most significantly affected. Presently, the field of digital transformation is limited in its analysis about the sustainability factors and is still controversial, especially in the energy business. This paper identifies an in-corporation factor in Industry 4.0, taking into account the effect on ESG. The research papers and the World Economic Forum reports were investigated and identified the correlation factor using machine learning to analyze their contents. We spotlighted the documents relevant to the energy industry and sustainable development. To quantify the model, confirmatory factor analysis (CFA) is proposed to generate a valid model, followed by path analysis with latent variables to evaluate the structural equation modeling (SEM). The result provides the conceptual model with impact factors and their correlations. The goodness of fit value is acceptable for the agreed-upon condition, as well as a descriptive that incorporates Industry 4.0 and ESG in terms of business, industry, and ESG in relation to the energy sector’s key issues.

Does the Environmental Regulation Intensity and ESG Performance Have a Substitution Effect on the Impact of Enterprise Green Innovation: Evidence from China

Against the background of green and sustainable development strategy, it is an effective way to carry out green innovation to cope with the increasing intensity of government environmental regulation for enterprises. Nevertheless, the regulatory role of ESG performance has been ignored. Based on panel data from Chinese listed companies from 2010 to 2019, this paper mainly studies whether the environmental regulation intensity and ESG performance have a substitution effect on the impact of green innovation by constructing a double fixed effect model. The empirical results showed that first, positive ESG performance is conducive to promoting green innovation. Second, there is a U-shaped relationship between the intensity of environmental regulation and high-quality green innovation, which reflects the effect of “offset before compensation”. With the increasing intensity of environmental regulation, high-quality green innovation tends to crowd out low-quality green innovation, which further improves the practical test of the “Porter Hypothesis”. Third, the positive ESG performance showed a negative regulatory effect between environmental regulation intensity and enterprise green innovation, which means that environmental regulation intensity and ESG performance have a substitution effect, and the effect is heterogeneous in different enterprises. This paper makes a beneficial exploration on how environmental regulation intensity and ESG performance affect enterprise green innovation, and demonstrates the regulatory role of ESG performance between environmental regulation intensity and green innovation, which reveals the impact of macro environmental policies on the green innovation behavior of micro subjects, and contributes to the further improvement of ESG concept and green innovation theory.