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Macro Uncertainty Impacts on ESG Performance and Carbon Emission Reduction Targets

Lookup NU author(s): Professor Habiba Al-ShaerORCiD

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This work is licensed under a Creative Commons Attribution 4.0 International License (CC BY 4.0).

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 engagement, 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. [1]

Publication metadata

Author(s): Alandejani M, Al-Shaer H

Publication type: Article

Publication status: Published

Journal: Sustainability

Year: 2023

Volume: 15

Issue: 5

Online publication date: 27/02/2023

Acceptance date: 23/02/2023

Date deposited: 28/02/2023

ISSN (electronic): 2071-1050

Publisher: MDPI

URL: https://doi.org/10.3390/su15054249

DOI: 10.3390/su15054249

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