ESG, innovation, and economic growth: an empirical evidence

Abstract

Purpose This paper aims to examine the relationships among environmental, social and governance (ESG) practices, innovation and economic growth in five Asian countries from 1990 to 2020. Design/methodology/approach The study innovatively constructed the ESG index at the country level by using frequency statistics on text mining and factor analysis for each country over time. In addition, this study used the autoregressive distributed lag method to establish a long-term relationship. Findings The authors discovered that ESG practices among corporate entities significantly impact economic growth in Malaysia, the Philippines and Singapore. Specifically, the environmental component positively affects the growth of Malaysia, Thailand and the Philippines, while the governance components of ESG contribute to Thailand’s economic growth. The authors also discovered that innovation improves countries’ economic growth, thus offering policy insights into promoting ESG practices and stimulating the ecosystem for innovation. Originality/value The paper fills the gap left in previous inconclusive findings on the association between ESG practices and country growth.