The Impact of ESG Practices on Economic Growth; A Comparative Analysis of Developing and Developed Nations
DOI:
https://doi.org/10.47067/ramss.v9i1.636Keywords:
Environmental, Social, Governance, Economic Growth, Developing, Developed, NationsAbstract
This paper will discuss how Environmental, Social, and Governance (ESG) positively affect economic growth by comparing the 12 developing and 12 developed countries between the years 2000 and 2023. Based on the stakeholder theory and panel data analysis three ESG proxies are used, namely renewable electricity (environmental), gross secondary school enrollment (social), and index of voice and accountability (governance) and GDP growth is used as the dependent variable. The data is collected from world Data bank and world Governance indicators. The fixed-effects regression with robust standard errors, and the system GMM to deal with indigeneity, show that the social factor (school enrollment) is the most consistent and statistically significant predictor of economic growth over the entire sample. Renewable electricity and the growth have a negative correlation whereas the indicator of governance has no statistically significant impact. Sub-group analysis reveals significant heterogeneity across country groups: school enrollment is a significantly greater source of growth in developing economies, and ESG dimensions have less statistical significance in developed countries, probably because there is less within-country variation over time. The findings help to emphasize the significance of context-dependent ESG policy frameworks and question the applicability of universal ESG-oriented development prescriptions, which adds to the empirical body of literature on sustainability and macroeconomic development.
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