ESG Integration & Economic Development: Literature Review

ESG Integration & economic Development

Literature Review, Methodological Framework, and Future Roadmap (Sem 8)

Relevance & Importance of ESG

ESG (Environmental, Social, Governance) has evolved from a niche metric to a core driver of corporate strategy and FDI. Its importance is underscored by regulatory mandates like the EU's CSRD and the push for Net-Zero targets. In the SAARC region, ESG is critical for attracting high-quality Foreign Direct Investment (FDI), enhancing resilience against climate risks, and aligning national growth with UN Sustainable Development Goals.

Key Reports Highlighting Prominence (2025)

Skadden Review (2025): Highlights how EU CSRD is driving detailed disclosures on emissions and social metrics globally.

Frontiers Study (2025): Confirms ESG improves financial performance in emerging markets via green innovation.

Harvard CorpGov (2025): US/EU CEOs now rank ESG as a top priority, specifically focusing on supply chain accountability.

Yadav et al. (2025): Identifies rising adoption despite data inconsistencies in investment reporting barriers.

Growth in Academic Literature

Based on a review of over 45 core papers and scientometric data spanning 47 years, there is an exponential rise in ESG-related publications. The chart demonstrates the cumulative number of key papers reviewed for this study, reflecting the surge in research regarding disclosure motives and rating methodologies.

Identified Gaps in Literature

Despite the volume of research, significant gaps remain: • Regional Bias: Heavy focus on China/EU; limited studies on SAARC/Africa beyond BRICS. • Mechanism Clarity: Lack of understanding of multi-pathway impacts beyond innovation. • Data Heterogeneity: Inconsistent ESG scores hinder decision-making. • Retail Behaviour: Limited analysis of retail investor behavior in the Global South.

Data Sources & Methodology

Data Sources: CSMAR, WIND, Bloomberg, CSI ESG databases, and World Bank National data.

Target Population: A-share listed firms and SAARC national panels (103 countries reference).

Quantitative Methods: Panel regression models (Fixed Effects/Random Effects) and difference-in-differences (DiD).

Advanced Analytics: Machine Learning (Double ML) for causality testing and heterogeneity analysis.

Analytical Framework

The study employs a Double Materiality Framework, assessing both financial materiality (impact on the firm) and impact materiality (impact on society). It integrates Stakeholder Theory and Legitimacy Theory to explain why diverse boards and transparent governance attract higher FDI. Key pillars include: • Environmental (Emissions, Resource Efficiency) • Social (Labor Standards, Diversity) • Governance (Transparency, Anti-corruption)

Countries with good governance showed a strong positive effect, with good governance increasing FDI inflow... emphasizing that improving governance can directly affect environmental regulations.

Chipalkatti et al. (2021) / Cole et al. (2006)

Progress Report (SAARC & Sem 7)

Literature Review: Synthesized 45+ papers covering Global and South Asian contexts (FDI-ESG nexus).

Framework Design: Analytical framework utilizing 'Double Materiality' and 'Pollution Halo Hypothesis' established.

Data Collection: Initial sourcing from CSMAR and World Bank for pilot testing completed.

Regional Context: SAARC-specific analysis (India, Bangladesh trends) mapped against global standards.

Roadmap for Semester 8

The remaining work for Semester 8 is structured to move from data preparation to final empirical analysis. The primary focus will be on executing the regression models across the global dataset (including 2025 data), conducting robustness checks for regional gaps in SAARC, and formulating policy implications.