What determines country-level ESG performance?

Abstract

This study provides empirical evidence on the country-level dynamics of ESG performance using two novel composite indicators across a panel of 123 countries from 2006 to 2022. A distributionally robust estimation strategy is employed, whereby method of moments panel quantile regression is adopted to take account for the non-normal distributional properties of ESG scores and to reveal potential asymmetries across the conditional distribution. Results complemented by two-way fixed effects and random effects models consistently show that socioeconomic development, resilient economy, rule of law, strong democratic institutions and international cooperation have positive and statistically significant effects on country-level ESG performance. The magnitude and significance of these effects vary across the conditional distribution of ESG scores, indicating that the strength of determinants is not uniform across countries but instead contingent upon their existing ESG performance levels.