ESG And Its Impact On Firm Performance Economics Assignment Help

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Question Description

A sustainable global economy starts with individual acts of conscience and responsible corporate citizenship. But taking on the climate and social issues that continue to affect people all over the world requires more. To drive fundamental change, individual action must evolve into institutional transformation – where Environmental, Social and Governance (ESG) becomes not simply a moral imperative, but a business imperative as well. The ESG components are

-Environment: Does the company have a positive or negative impact on resources?

-Social: How does the company treat its employees, customers, and community?

-Governance: Is the company’s leadership structured to facilitate accountability and independence.

Required

You are required a literature review on the Concern for ESG and its impact on firm performance.

Harvard reference should be followed. Only use published Articles, don't use books or internet.

See attached document for more details.

You have to use the same style of iterature review in the attached Article part "2.Prior literature"

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ASSIGNMENT A sustainable global economy starts with individual acts of conscience and responsible corporate citizenship. But taking on the climate and social issues that continue to affect people all over the world requires more. To drive fundamental change, individual action must evolve into institutional transformation – where Environmental, Social and Governance (ESG) becomes not simply a moral imperative, but a business imperative as well. The ESG components are - Environment: Does the company have a positive or negative impact on resources? - Social: How does the company treat its employees, customers, and community? - Governance: Is the company’s leadership structured to facilitate accountability and independence. Required You are required a literature review on the Concern for ESG and its impact on firm performance. The criteria below detail the areas, which will be taken into account when the assignment is marked. 1. To address the subject satisfactorily, a typed format is mandatory. Pass assignments are expected to be legible, tidy, well organized and written in clear understandable English. 2. High grades [70%, 75%, +80%] need to demonstrate sustained coherent analytical ability. A systematic approach to analysis and evaluation is required for grades 60% to 85% . 3. Evidence of reading and some understanding of concepts are needed to achieve a pass grade [50%]. Integration of theory and practice is expected for any grade above 65%. 4. You are expected to clearly state any assumptions you make, and support statements and theories by referencing to appropriate sources. [This is essential for higher grades but does not necessarily prejudice a pass mark [50%] if it is missing]. 5. As well as submitting a hard copy of your assignment you are also required to submit the electronic version. Unless both, hard copy and electronic versions are provided it will not be counted as submitted. ...
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Tutor Answer

JesseCraig
School: Purdue University

Attached.

ESG

ESG AND ITS IMPACT ON FIRM PERFORMANCE

Name:

Course:
Professor:
Institution:
Date:

1

ESG

2

The purpose of this paper is to evaluate the impact of Environmental, Social and
Governance (ESG) reporting on the performance of companies. The document indicates that we
have both negative and positive relationship between the financial performance of a company
and its ESG reporting. The literature on the factor of Environment, Social and Governance
(ESG) issue is a non-conclusive and extensive area of research. Policy makers have recognized
the impact of inefficiency and the ESG criteria in the behavior of investors as detailed under the
concept of behavioral finance. The adoption of the ESG criteria in decisions concerning
investment is expected that it will reduce inefficiencies from the decision making process. The
criteria of ESG is also expected to improve the overall performance of an organization regarding
all its stakeholders. Some surveys have highlighted the financial awareness of personnel and
recognition of the SRI domain. Analysts portray how the mainstream process of investment have
on investors by showing a healthy integration of the ESG criteria and a collaborative
commitment in the process. The ESG criteria have indicated a strong integration in its
investment process by showing how an ambitious, reliable and robust decision-making process it
plays and a crucial role in improving the efficiency of information and investigate the decision of
the fund manager in the process information content generation.
Given that companies practicing ESG investment decisions have a reduced cost of
financing, they are generally expected to have higher valuations. This is indeed what has
typically been found from past studies. For instance, Albuquerque, Durnev and Koskinen, (2013)
show that both the number of lawsuits related to environmental issues and release of toxic
chemicals are negatively and significantly correlated. It is further argued that the performance of
the corporate ESG is the driving force in achieving a positive relationship between the welfare of
stakeholder’s such as customers, employees, and communities. The study indicated that a firm is
significantly and positively influenced by its eco-efficiency even after the characteristics of the
firm has been controlled. They studied more than 1556 mergers that done between 1992 and
2007 and it was discovered that companies that had excellent CSR qualities created value for
both the target and the acquiring shareholders. Social performance is associated with higher
performance compared to environmental concerns among the ESG factors. Most studies
documented a positive relationship between firm valuation and ESG scores.
An analysis of quantitative information from fund managers, finance directors, and
financial analyst was developed to study the theory of market information. From the analysis
done by Beurden and Gossling, (2014) the author find out two exciting outcomes. It was found
that managers believed how ESG are essential in selecting a particular type of investment in the
market. These managers had the belief that poor governance and environmental performance
hurt the financial health of an investment. However, it was a bit difficult to accurately evaluate
the performance of the company regarding social and ecological factors. The belief of the fund
managers in the integration of the ESG with the investment process is a strong belief concerning
the practices of the ESG, but they didn’t include the concept in their priority list. It was further
noted that ESG awareness was done at the lowest level of the organization or sometimes limited
to brand departments and corporate outreach. However, ESG should be implemented and
somehow executed from the head office departments, and the ESG misunderstanding in
organizations should be investigated too.
Assuming firms with better ESG have higher valuations, it is expected that lower returns
will be derived from their future returns unless investors do not incorporate the higher current
valuations into future returns. The research was done by Angel and Rivoli, (2016) on the
performance of the Socially Responsible Investments (SRI) and general funds are always

ESG

3

compared to the oldest line of the ESG. The conventional funds and the SRI funds differ in terms
of style but have the same alpha. Losses occurred due to poor diversification strategies by the
SRI funds and hence were offset by the intensified screening selection. It has been argued that
the mutual funds related to SRI funds on average, do not have a significant impact on the socially
responsible firms compared to the conventional funds of most countries. However, investors that
are socially responsible pay a higher price due to the possibility of higher returns when they are
taken into account. Good ESG companies may be preferred by a higher number of companies
while the evil ESG companies may be shunned leading to higher returns on the top ESG
companies. Stocks from socially controversially companies typically have a higher expected
return since most investors avoid them and the proportion of investors that are socially
responsible in the market are directly correlated to the increase in expected performance.
Companies with controversial shareholders receive increased current returns and compensation
for having in possession with more shares that are held by firms that are environmentally
controversial than they would if no boycotts existed in the company. In contrast, companies in
the UK with excellent ratings in terms of CSR generally have better performance in...

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Anonymous
Tutor went the extra mile to help me with this essay. Citations were a bit shaky but I appreciated how well he handled APA styles and how ok he was to change them even though I didnt specify. Got a B+ which is believable and acceptable.

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