Developing a model to assess the impact of ESG practices effectiveness and their disclosure quality on the value of companies in the risk controlling system

Subject. The article considers the impact of specific sustainable development practices (environmental, social, and corporate governance-related) on companies' ability to create value. Objectives. The study aims to determine the directions and magnitude of the impact of sustainable development practices of global non-financial companies on their market value in the coordinates "effectiveness of ESG practices – quality of ESG practice disclosure". Methods. We employed a classification method enabling to identify four patterns in the space "effectiveness of ESG factors – quality of ESG disclosure". To determine the impact of company's positioning by patterns on its market value, we used one-way variance analysis (one-way ANOVA). We applied the system generalized method of moments (SYS-GMM) to determine the impact of individual elements from the indices on company value. Results. We constructed indices of ESG practices effectiveness and the quality of ESG practices disclosure of global companies; identified patterns of following sustainable development practices by company in the coordinates "effectiveness –quality of disclosure" based on index values; identified links between the identified patterns and the company's ability to create value. Conclusions. The results of the study proved that investors consider the effectiveness of sustainable development practices in a complex, both from the point of view of effectiveness and from disclosures. The findings can be used to develop practical risk-controlling tools, modern methods for assessing value creation in compliance with the principles of sustainable development, and for reducing environmental and social risks.