Exploring the relationship between environmental, social and governance, carbon emission control, and financial performance in Asean-6

Abstract

Business activities that focus on environmental, social, and governance (ESG) factors have gained increasing prominence, contributing to the dual objectives of economic growth and environmental sustainability. This article seeks to examine the relationship between ESG practices, carbon emission control, and financial performance in enterprises across Singapore, Thailand, Indonesia, Malaysia, the Philippines, and Vietnam (ASEAN-6). The study employs Generalised Method of Moments (GMM) regression, quantile regression, and the Oaxaca-Blinder decomposition method to analyse data sourced from Refinitiv Eikon for the period 2016-2022. The findings suggest that ESG practices have a positive effect on financial performance but a negative impact on financial stability. Additionally, the study reveals that carbon emission control positively influences financial performance, with the impact of ESG on carbon emission control varying significantly. The effect of ESG on financial performance is also found to be uneven across different contexts. Based on these results, the authors recommend policies aimed at promoting sustainable development within companies. These findings provide empirical evidence regarding the impact of ESG practices and carbon emission control on financial performance within the emerging regional context, offering valuable insights for managers to inform strategic decisions on ESG matters. Furthermore, they assist investors in evaluating ESG-related risks and opportunities to foster sustainable and responsible development.