The adverse impact of corporate ESG controversies on sustainable investment

Rui Xue; Hongqi Wang; Yuhao Yang; Martina K. Linnenluecke; Kaifang Jin; Cynthia Weiyi Cai

doi:10.1016/j.jclepro.2023.139237

The adverse impact of corporate ESG controversies on sustainable investment

Rui Xue, Hongqi Wang, Yuhao Yang, Martina K. Linnenluecke, Kaifang Jin, Cynthia Weiyi Cai

Department of Applied Finance

Research output: Contribution to journal › Article › peer-review

35 Citations (Scopus)

243 Downloads (Pure)

Abstract

Global businesses are facing increasingly significant climate risks. Firms with ESG controversies will likely suffer from higher financing costs and inadequate investment capability, leading to investment inefficiency. We use a newly introduced ESG Controversy Score database to investigate the relationship between ESG controversies and corporate investment efficiency. The results show that ESG controversies significantly reduces firms’ overall investment efficiency, and such adverse impact is manifest in underinvestment inefficiency. Further analysis indicates that such a negative effect is more pronounced in firms with larger size and higher analyst coverage. Our findings highlight the significant role of ESG misbehaviour in corporate sustainable development.

Original language	English
Article number	139237
Pages (from-to)	1-10
Number of pages	10
Journal	Journal of Cleaner Production
Volume	427
Early online date	Oct 2023
DOIs	https://doi.org/10.1016/j.jclepro.2023.139237
Publication status	Published - 15 Nov 2023

Bibliographical note

© 2023 The Authors. Published by Elsevier Ltd. Version archived for private and non-commercial use with the permission of the author/s and according to publisher conditions. For further rights please contact the publisher.

Keywords

Climate risk
ESG
ESG controversies
Investment efficiency
Sustainable development

Access to Document

10.1016/j.jclepro.2023.139237Licence: CC BY

Publisher version (open access)Final published version, 1.27 MBLicence: CC BY

Cite this

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title = "The adverse impact of corporate ESG controversies on sustainable investment",

abstract = "Global businesses are facing increasingly significant climate risks. Firms with ESG controversies will likely suffer from higher financing costs and inadequate investment capability, leading to investment inefficiency. We use a newly introduced ESG Controversy Score database to investigate the relationship between ESG controversies and corporate investment efficiency. The results show that ESG controversies significantly reduces firms{\textquoteright} overall investment efficiency, and such adverse impact is manifest in underinvestment inefficiency. Further analysis indicates that such a negative effect is more pronounced in firms with larger size and higher analyst coverage. Our findings highlight the significant role of ESG misbehaviour in corporate sustainable development.",

keywords = "Climate risk, ESG, ESG controversies, Investment efficiency, Sustainable development",

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note = "{\textcopyright} 2023 The Authors. Published by Elsevier Ltd. Version archived for private and non-commercial use with the permission of the author/s and according to publisher conditions. For further rights please contact the publisher.",

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T1 - The adverse impact of corporate ESG controversies on sustainable investment

AU - Xue, Rui

AU - Wang, Hongqi

AU - Yang, Yuhao

AU - Linnenluecke, Martina K.

AU - Jin, Kaifang

AU - Cai, Cynthia Weiyi

N1 - © 2023 The Authors. Published by Elsevier Ltd. Version archived for private and non-commercial use with the permission of the author/s and according to publisher conditions. For further rights please contact the publisher.

PY - 2023/11/15

Y1 - 2023/11/15

N2 - Global businesses are facing increasingly significant climate risks. Firms with ESG controversies will likely suffer from higher financing costs and inadequate investment capability, leading to investment inefficiency. We use a newly introduced ESG Controversy Score database to investigate the relationship between ESG controversies and corporate investment efficiency. The results show that ESG controversies significantly reduces firms’ overall investment efficiency, and such adverse impact is manifest in underinvestment inefficiency. Further analysis indicates that such a negative effect is more pronounced in firms with larger size and higher analyst coverage. Our findings highlight the significant role of ESG misbehaviour in corporate sustainable development.

AB - Global businesses are facing increasingly significant climate risks. Firms with ESG controversies will likely suffer from higher financing costs and inadequate investment capability, leading to investment inefficiency. We use a newly introduced ESG Controversy Score database to investigate the relationship between ESG controversies and corporate investment efficiency. The results show that ESG controversies significantly reduces firms’ overall investment efficiency, and such adverse impact is manifest in underinvestment inefficiency. Further analysis indicates that such a negative effect is more pronounced in firms with larger size and higher analyst coverage. Our findings highlight the significant role of ESG misbehaviour in corporate sustainable development.

KW - Climate risk

KW - ESG

KW - ESG controversies

KW - Investment efficiency

KW - Sustainable development

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UR - http://purl.org/au-research/grants/arc/DP200102332

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JF - Journal of Cleaner Production

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ER -

The adverse impact of corporate ESG controversies on sustainable investment

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The Effects of International Climate Policy on Financial Markets

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The adverse impact of corporate ESG controversies on sustainable investment

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The Effects of International Climate Policy on Financial Markets

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