The paper reviewed the existing literature on the financial and sectoral importance of the Environmental, Social, and Governance (ESG). Given the expanding awareness of the stakeholders on environmental and social issues, ESG has continuously gain attention through the integration of its sustainable characteristics for the long-term investments. The paper discussed the motivations for the relevant parties to integrate ESG in their overall business model. In general, these ESG motivations boost stakeholders’ efficiency, risk mitigation, transparency, reputation, and overall marketability by utilizing ESG characteristics, which consequently improve its financial performance. It also put emphasis on the effects of ESG on environmental, social, and governance sectors to identify the sectoral impact of ESG on each pillar. By addressing each ESG sector, the paper provides a non-financial perspective which can be used to address corporate governance and socio-environmental impact.
Lastly, to further emphasize the importance of ESG and its role on the long-term investments, the paper also conducted a review of the existing literature about the performance of ESG stocks during the market collapse due to the COVID-19 pandemic. It shows that ESG stocks have outperformed its counterparts on most cases. These studies showed that ESG were more robust and risk-averse during the pandemic than other investments.
Guia Theresa Eguia, Seoul National University, South Korea
Stream: Economic Sustainability: Environmental Challenges and Economic Growth
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