Open AccessThe predictive role f country-level ESG indicators
Author(s) -
Fanni Dudás,
Heleffa
Publication year - 2020
Publication title -
economy and finance
Language(s) - English
Resource type - Journals
eISSN - 2677-1322
pISSN - 2415-9379
DOI - 10.33908/ef.2020.4.5
Subject(s) - predictive power , leverage (statistics) , corporate governance , business , empirical evidence , investment (military) , finance , political science , philosophy , epistemology , machine learning , politics , computer science , law
Environmental, social and governance aspects, collectively known as ESG fac-tors, have gained significant importance in finance recently. This paper focuses on uncovering the importance of the predictive power of country-level ESG indica-tors in estimating risk premiums. We use the Worldwide Governance Indicators and the database of global ESG indicators provided by the World Bank, while we apply the neural networks methodology. A constant relationship between ESG factors and risk premiums would result in obvious implications for policymakers, as well as for investors. We seek empirical evidence to leverage ESG considera-tions in investment decisions and policymaking to ensure sustainable economic development.