TY - JOUR

T1 - ESG practices mitigating geopolitical risks: Implications for sustainable environmental management

AU - Alnafrah, Ibrahim

N1 - The research funding from the Ministry of Science and Higher Education of the Russian Federation (Ural Federal University project within the Priority-2030 Program) is gratefully acknowledged.

PY - 2024/5/1

Y1 - 2024/5/1

N2 - As climate change and geopolitical conflicts intensify, understanding how geopolitical risks affect companies prioritizing Environmental, Social, and Governance (ESG) practices is crucial. This study investigates the dynamic relationship between global geopolitical risks and the performance of Environmental, Social, and Governance (ESG) and non-ESG companies, particularly their influence on green markets. Utilizing a robust methodological framework, including the dynamic time-varying parameters vector autoregression (TVP-VAR) model, and causal impact modeling, we analyze daily financial data from 2021 to 2024. The results reveal a substantial negative impact of geopolitical risks on non-ESG companies, contrasting with the resilience of ESG-committed counterparts. This suggests that ESG-committed companies demonstrate better resilience against geopolitical risks, emphasizing the protective role of ESG practices amid uncertainties. Additionally, the inclusion of ESG companies in green markets diminishes the severity of the negative impact of geopolitical risks, underlining the transformative role of ESG commitment in shaping investor behavior towards sustainable investments. Our findings offer insights for policymakers and investors navigating geopolitical risks and ESG performance, with a focus on environmental management, and provide guidance for effective risk mitigation and investment policies to enhance environmental sustainability.

AB - As climate change and geopolitical conflicts intensify, understanding how geopolitical risks affect companies prioritizing Environmental, Social, and Governance (ESG) practices is crucial. This study investigates the dynamic relationship between global geopolitical risks and the performance of Environmental, Social, and Governance (ESG) and non-ESG companies, particularly their influence on green markets. Utilizing a robust methodological framework, including the dynamic time-varying parameters vector autoregression (TVP-VAR) model, and causal impact modeling, we analyze daily financial data from 2021 to 2024. The results reveal a substantial negative impact of geopolitical risks on non-ESG companies, contrasting with the resilience of ESG-committed counterparts. This suggests that ESG-committed companies demonstrate better resilience against geopolitical risks, emphasizing the protective role of ESG practices amid uncertainties. Additionally, the inclusion of ESG companies in green markets diminishes the severity of the negative impact of geopolitical risks, underlining the transformative role of ESG commitment in shaping investor behavior towards sustainable investments. Our findings offer insights for policymakers and investors navigating geopolitical risks and ESG performance, with a focus on environmental management, and provide guidance for effective risk mitigation and investment policies to enhance environmental sustainability.

UR - http://www.scopus.com/inward/record.url?partnerID=8YFLogxK&scp=85190831900

UR - https://gateway.webofknowledge.com/gateway/Gateway.cgi?GWVersion=2&SrcAuth=tsmetrics&SrcApp=tsm_test&DestApp=WOS_CPL&DestLinkType=FullRecord&KeyUT=001233667100001

U2 - 10.1016/j.jenvman.2024.120923

DO - 10.1016/j.jenvman.2024.120923

M3 - Article

VL - 358

JO - Journal of Environmental Management

JF - Journal of Environmental Management

SN - 0301-4797

M1 - 120923

ER -