The Factors Affecting the Environment, Social, and Governance (ESG) performance of

selected Philippine Publicly Listed Firms

Review of Related Literature

The impact of ESG factors on the performance of Malaysian public-limited companies is

examined in terms of profitability, firm value, and cost of capital in a recent study by Ruhaya Atan,
Md. Mahmudul Alam, Jamaliah Said, and Mohamed Zamri of University Teknologi MARA titled
"The Impacts of Environmental, Social, and Governance Factors on Firm Performance: Panel
Study on Malaysian Companies" (Atan et al., 2018). Bloomberg's ESG database, which provides
complete ESG and financial data from 2010 to 2013, was used to choose 54 companies. Investors,
creditors, governments, and other environmental groups are all concerned about businesses'
contributions to long-term sustainability. This is one of the first empirical studies to examine the
impact of ESG factors on Malaysian PLC profitability, business value, and cost of capital. Because
it is a fresh study on Malaysia, the findings of this study will be helpful to investors, analysts,
politicians, and other related institutions.

In the study entitled “The effect of environmental, social and governance risks” (Dogru et
al., 2022) the impact of environmental, social, and governance concerns on business value is
examined. The researcher investigates how these news releases affect the anomalous returns of
tourism businesses using event research approaches. The data imply that such press
announcements have a little immediate impact on business value. Members of the sustainability
committee had an impact on the value of tourism businesses during the recent epidemic.

According to Timothy J. McClimon's paper "The Impact of Environmental, Social, And

Governance (ESG) Issues On Companies Today," Corporate Social Responsibility (CSR)
transforms into Environmental, Social, and Governance (ESG) for many organizations. There is
mounting evidence that ESG policies and practices improve a company's financial success and
long-term business strategy, as well as its ability to attract and retain diverse personnel. The
procedure of identifying and reporting on these areas differs widely between firms and is just now
becoming standardized across industry groups and marketplaces. According to the World
Economic Forum's annual assessment of companies, those who make a greater effort to understand
employee opinions have higher employee satisfaction and are more appealing to young talent.
(McClimon, 2020)

The effects of firms' ESG (Environmental, Social, and Governance) disclosures on firm
performance, moderated by firm competitive advantage, are investigated in a study entitled
"Environmental, Social, and Governance (ESG) disclosure, competitive advantage, and
performance of firms in Malaysia" by Wan Masliza Wan Mohammad and Shaista Wasiuzzaman.
The data is based on 3966 firm-year observations from 661 companies listed on the Bursa Malaysia
between 2012 and 2017. In our regression study, we apply clustering approaches to improve the
robustness of our findings. The researcher discovered consistent evidence that increasing ESG
disclosure by one unit increases business performance by about 4% in Malaysia. Policymakers can
also improve regulatory frameworks by incorporating ESG into various investment operations and
value-creation projects. This study suggests that the amount of transparency and the financial
incentive for enterprises with high ESG scores should be reconsidered.

According to the findings in the study conducted by Michael Lee entitled "Understanding
the effects of Environment, Social, and Governance conduct on financial performance: Arguments
for a process and integrated modelling approach", using ESG as a business model has more
positive than negative effects on financial performance, and that these effects vary depending on
the context. According to the review of the literature, there is no clear consensus or definitive
understanding of how ESG behavior affects financial performance, and the relationship is not
simple. Given the complexities of ESG performance research, the researcher outlined three key
themes below with the goal of filling research gaps and paving the way for future research with
implications and conclusions for fund managers, investors, and researchers. To begin, the
researcher discussed why using a process and integrated approach to model specification is
important because it forces researchers to consider the ESG conduct level of analysis, first-order
variables, mediating variables, and moderating variables that influence financial performance.
Second, the researcher proposed an original concept: ESG behavior should be based on the
possibility that all of its components must be harmoniously balanced in order to achieve financial
performance. The researcher discussed why it is critical to include balanced ESG components in
process and integrated models that extend established management theory to test the links between
ESG behavior and financial performance. Third, the researcher talked about future research on
greenwashing, a growing concern among fund managers, investors, and academics. (Lee, 2022)

References:
Atan, R., Alam, M. M., Said, J., & Zamri, M. (2018). The impacts of environmental, social,
and governance factors on firm performance. Management of Environmental Quality: An
International Journal, 29(2), 182–194. https://doi.org/10.1108/meq-03-2017-0033

Dogru, T., Akyildirim, E., Cepni, O., Ozdemir, O., Sharma, A., & Yilmaz, M. H. (2022).
The effect of environmental, social, and governance risks. Annals of Tourism Research,
95, 103432. https://doi.org/10.1016/j.annals.2022.103432

McClimon, T. J. (2020, June 29). The Impact of Environmental, Social And Governance
(ESG) Issues On Companies Today. Forbes.
https://www.forbes.com/sites/timothyjmcclimon/2020/06/29/the-impact-of-
environmental-social-and-governance-esg-issues-on-companies-today/?sh=716a4f85d2a2
Mohammad, W. M. W., & Wasiuzzaman, S. (2021). Environmental, Social, and
Governance (ESG) disclosure, competitive advantage, and performance of firms in
Malaysia. Cleaner Environmental Systems, 2, 100015.
https://doi.org/10.1016/j.cesys.2021.100015

Lee, M. T., & Suh, I. (2022). Understanding the effects of Environment, Social, and
Governance conduct on financial performance: Arguments for a process and integrated
modelling approach. Sustainable Technology and Entrepreneurship, 1(1), 100004.
https://doi.org/10.1016/j.stae.2022.100004