Macro Uncertainty Impacts on ESG Performance and Carbon Emission Reduction Targets

Maha Alandejani () and Habiba Al-Shaer
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Maha Alandejani: Economics Department, Faculty of Economics and Administration, King Abdulaziz University, Jeddah 21589, Saudi Arabia
Habiba Al-Shaer: Newcastle University Business School, Newcastle University, Newcastle upon Tyne NE1 4SE, UK

Sustainability, 2023, vol. 15, issue 5, 1-15

Abstract: This study examines the impact of three macro uncertainty factors: economic policy uncertainty (EPU), political instability (PIS), and cultural uncertainty avoidance (UA), on corporate environmental, social and governance (ESG) performance and carbon emission reduction targets. Additionally, we examine whether these macro factors are affected by the profitability of the company. Using an unbalanced sample of companies located in the USA, China, and the UK during the period 2013–2020, results show that during times of economic uncertainty, companies are more likely to engage in ESG activities, including establishing emission reduction targets. Companies in countries with lower levels of political stability (PS) exhibit greater levels of social and environmental engagements, and companies operating in societies that tolerate risks, including the risk associated with climate change, are more likely to have better ESG performance and be committed to emission reduction targets. The results also suggest that profitable companies are more likely to deal with uncertain environments successfully, as they have the required resources to invest in ESG. The study suggests several practical implications for managers and policymakers.

Keywords: economic policy uncertainty; political stability; uncertainty avoidance; ESG performance; carbon emission (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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