The fundamental effects of ESG disclosure quality in boosting the growth of ESG investing

This paper investigates the link between firms’ ESG disclosure quality and the growth of ESG investment based on a cross-country/region firm-level panel dataset. We find evidence supporting moderating effects of ESG disclosure quality on increasing firms’ Tobin’s Q, ROA, and reducing downside risks. ESG disclosure quality has a larger effect on enlarging the ESG investment scale, accelerating the growth of ESG investing and promoting the ESG investment more dispersed among all firms in mandatory CSR reporting countries/regions compared with other countries/regions. Our findings also suggest the importance of good and continuing good ESG disclosure quality for firms to benefit from implementing ESG practices.