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<p>The study investigates the responsiveness of Environmental, Social, and Governance (ESG) equity indices to impulses in both endogenous country-level variables – such as stock market indices, long-term interest rates, real exchange rates, inflation, and geopolitical risk – and global risk factors variables including oil prices, volatility index, and federal rates. The primary objective is to provide valuable insights for ESG stakeholders, particularly at the policy level, regarding the impact of evolving risks on ESG performance. The study is based on 12 countries, including the G-7 economies (Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States) and BRICSM economies (i.e. Brazil, China, India, Mexico, and South Africa) excluding Russia. Monthly country-specific data from January 2013 to April 2024 is utilized. An Autoregressive Distributed Lag (ARDL) model is applied to examine both long-run and short-run effects of the endogenous a nd exogenous variables on the ESG indices. The findings indicate that the stock market indices positively impact the ESG indices of countries under study. However, nations like Brazil, India, and Canada – characterized by relatively weaker reporting benchmarks compared to international standards – demonstrate a stronger positive relationship. In contrast, countries with mature reporting environments such as the United Kingdom, Japan, and China exhibit a weaker dependency between stock indices and ESG indices. Second, the ESG and Geopolitical risk nexus is apparently negative for Japan, United States, India, and Mexico and unusually positive for Brazil, likely due to Brazil’s strategic realpolitik balance and its positioning as a key global business partner. Third, while India, France, Italy, and United States experiences negative relationship between ESG and Oil, the United Kingdom shows a positive association, attributed to its robust governance framework and policies. This study provides a novel analysis of the impact of both endogenous and exogenous variables on the ESG indices. It highlights the need for a fresh perspective on these issues, particularly in the context of evolving geopolitical risks, the changing ESG landscape and shifting global policy responses. The findings carry significant policy implications, emphasizing the importance of understanding the dynamic relationship between ESG factors and risk variables in today’s shifting global order.</p>

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Do ESG Indices React To Macroeconomic and Global Risks? An Empirical Analysis

  • 期刊论文

  • 发表日期：

    2025年9月2日

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  • Maneesh Gupta,
  • Ajaya Kumar Panda

摘要

The study investigates the responsiveness of Environmental, Social, and Governance (ESG) equity indices to impulses in both endogenous country-level variables – such as stock market indices, long-term interest rates, real exchange rates, inflation, and geopolitical risk – and global risk factors variables including oil prices, volatility index, and federal rates. The primary objective is to provide valuable insights for ESG stakeholders, particularly at the policy level, regarding the impact of evolving risks on ESG performance. The study is based on 12 countries, including the G-7 economies (Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States) and BRICSM economies (i.e. Brazil, China, India, Mexico, and South Africa) excluding Russia. Monthly country-specific data from January 2013 to April 2024 is utilized. An Autoregressive Distributed Lag (ARDL) model is applied to examine both long-run and short-run effects of the endogenous a nd exogenous variables on the ESG indices. The findings indicate that the stock market indices positively impact the ESG indices of countries under study. However, nations like Brazil, India, and Canada – characterized by relatively weaker reporting benchmarks compared to international standards – demonstrate a stronger positive relationship. In contrast, countries with mature reporting environments such as the United Kingdom, Japan, and China exhibit a weaker dependency between stock indices and ESG indices. Second, the ESG and Geopolitical risk nexus is apparently negative for Japan, United States, India, and Mexico and unusually positive for Brazil, likely due to Brazil’s strategic realpolitik balance and its positioning as a key global business partner. Third, while India, France, Italy, and United States experiences negative relationship between ESG and Oil, the United Kingdom shows a positive association, attributed to its robust governance framework and policies. This study provides a novel analysis of the impact of both endogenous and exogenous variables on the ESG indices. It highlights the need for a fresh perspective on these issues, particularly in the context of evolving geopolitical risks, the changing ESG landscape and shifting global policy responses. The findings carry significant policy implications, emphasizing the importance of understanding the dynamic relationship between ESG factors and risk variables in today’s shifting global order.