International standard setters, policy makers and institutional investors have progressively intensified their focus on Corporate Social Responsibility (CSR) and Environmental Social Governance (ESG) factors, pointing out their importance for companies¿ long-term value creation. At the same time, there has been an exponential increase in implementation of CSR practices and ESG disclosure by companies worldwide, based on the idea that "doing good is good for business". Recently the European Commission placed CSR - aimed at companies, also via Non-financial disclosure (NFD) requirements for large companies - and ESG - targeted to investors and financial institutions - at the heart of its policies aimed at more sustainable path for growth. Even the recent pandemic crisis following the spread of Covid-19 calls for a reconsideration of ESG factors. The pandemic is a rare type of shock to the economy of the world that creates a challenging economic context and uncertainty, in which is important to support vulnerable individuals, all the stakeholders and communities impacted. In this perspective, Covid crisis is expected to create a new sustainability paradigm that deserves a deep understanding.
Despite a growing body of literature on the potential benefits of a more sustainable economic growth, a comprehensive framework encompassing the various facets has not yet been developed and this is the first objective of the proposed multidisciplinary project. The research program entails the development of a database, that includes hand-collected data from the two NFD reports for 2019 and 2020 and qualitative observations directly drawn from interviews and surveys. An empirical investigation will be conducted, as well as an impact assessment comparing various of the ESG reforms for capital markets set forth by the EC action plan. Lastly, we explore the impact of the Covid-19 pandemic on issues related to CSR and the three pillars of ESG (Environment, Social and Governance).
The innovative contribution of this research project is largely determined by its comprehensive and multidisciplinary approach, aiming to bring together different experts from complementary fields. Indeed, the possibility to achieve the objectives characterizing this project requires a set of diverse and complementary competences and skills.
We can rely on legal, regulatory and compliance skills of law professors and professionals, which will be helpful in performing the comparative analysis among different regulations existing in different countries, rather than considering the potential policy implications determinable by our integrated model of analysis. Moreover, the group includes accounting and reporting experts capable of navigating the differences in accounting principles and non-financial reporting practices in different countries. The knowledge of organization and governance issues will enable the group to address issues concerning potential organizational and management impacts, deriving from the implementation of ESG practices across different industrial and financial sectors. Finally, the competences in the area of finance and econometric methodologies is instrumental to discover the potential causal relation existing between ESG and financial performance. To the best of our knowledge, this is the first academic research project aiming to perform such a comprehensive investigation on CSR and ESG, starting from the definition of a general framework and encompassing an empirical investigation of the relationship between ESG and performance based on a novel data-set created for this purpose and direct observation via surveys to assess the objectives and the benefits experienced by firms that provided NFD.
In this perspective, this research aims to contribute significantly the economic literature, by considering several issues which still lack an adequate investigation and the new sustainability framework in the pre and post-Covid-19 economy. The framework will derive from and be tested on different sectors and geographical areas, so to consider the differences achieved by each country in term of general consensus about CSR and ESG. Then, we will investigate the differences existing between non-financial sectors and financial sector. Finally, we are going to empirically study the causal relationship between ESG and financial performance, by also including a potential mechanism (¿mediating variable¿) by which the independent variables can produce changes on companies¿ performance and the advantages perceived by companies via direct observations though surveys.
A unique data-set will be developed as part of the proposed research project. In detail, we are going to collect data related to:
- National level: macroeconomic data which may have an impact on companies' ESG strategies (i.e. related to the composition of the population, level of pollution, climate change, ...)
- Company level:
o Corporate Governance: data related to the CG structure, also related to ESG (e.g. the presence of CSR/ESG committees in the governing boards, the presence of female board members, the development of ESG policies and broadly the strength and scope of ESG practices)
o ESG indicators: we are going to map the actual ESG information/indicators disclosed by companies by manually collecting them from companies¿ sustainability reports.
o Performance indicators: both from an accounting and market perspective. The accounting perspective will include financial statements items (ROA, ROE, ROI). This will allow us to include in the sample both listed and non-listed firms, bearing also in mind the differences among the industries considered in the sample. Market evaluation will include the traditional measures of firms¿ performance (e.g. Tobin's Q, market capitalization, Price to Book ratio) as well as price performance measures in the short run and in the long run.
The research aims to contribute to the policy agenda, aiming to perform an ¿independent¿ analysis on the potential benefits and costs related to extending NFD. In this perspective, if the CMU's project outlined the necessity to help that firms to easily access to capital markets, by reducing the costs for being listed, it is important to properly calibrate requirements applying an adequate principle of proportionality.
Tentative timeline
Year 1
- systematic review of the literature
- completion of the database
- CSR/ESG and company performance paper (1)
- systematic literature reviews (2 and 3)
- organization of the first (introductive) conference
Year 2
- survey among a significant sample of firms on CSR/ESG
- benefits and costs of ESG paper (4)
- submission to A journals (Anvur national lists) of papers (1-3)
- preparation of further 2 papers (5), (6) base on quantitative and qualitative investigations
Year 3
- submission to A journals (Anvur national lists) of papers (4-6)
- preparation of a white paper
organization of the second (conclusive) conference