1269. Country Policy Drives Companies' Sustainability
Invited abstract in session WD-7: Sustainable investments and financial performance , stream Risk Management in Commodities and Financial Markets .
Wednesday, 14:30-16:00Room: Clarendon GR.01
Authors (first author is the speaker)
| 1. | Sergio Hoffmann
|
| Department of Social Sciences and Economics, Sapienza Università di Roma | |
| 2. | Rita D'Ecclesia
|
| Statistics, Sapienza University of Rome |
Abstract
Sustainability has become one of the central drivers affecting investors’ preferences worldwide, attracting the attention of agents, researchers, and regulators.
To demonstrate their commitment to sustainability, companies align their strategies with the UN sustainable goals (SDGs), and how they succeed to fulfill these, is often influenced by country policies.
While numerous studies have explored sustainability performance at the corporate level, research at the country level remains limited. The role of the regulatory framework is crucial, as it significantly influences sustainability outcomes for both corporations and countries.
In this paper, we introduce a national Environmental, Social, and Governance (ESG) score aggregating corporate ratings provided by LSEG Refinitiv from 2013 to 2022.
We model countries' commitment to ESG issues and find that variations in country ratings closely align with the effectiveness of regulatory frameworks.
To validate our index, we study its relationship with main national sustainability related metrics provided by World Bank, and we find that the national ESG rating is primarly driven by a consistent set of indicators.
Using machine learning algorithms, we capture national divergences, accounting for both linear and non-linear relationships.Results show that country ratings improve over time as they rely on the local and global growing importance of sustainability.
Keywords
- Sustainable Development
- Machine Learning
- Financial Modelling
Status: accepted
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