ESG Performance in the EU and ASEAN: The Roles of Institutional Governance, Economic Structure, and Global Integration

This study investigates how Environmental, Social, and Governance (ESG) performance is shaped across 31 countries in the European Union (EU) and the Association of Southeast Asian Nations (ASEAN) from 1990 to 2020. To explore these relationships, we employed the Continuously Updated Generalized Method of Moments (CUE-GMM) and the Limited Information Maximum Likelihood (LIML), with additional robustness checks using Instrumental Variables Two-Stage Least Squares (IV-2SLS), Panel-Corrected Standard Errors (PCSE), and Driscoll-Kraay regressions. The results highlight democratic governance as a consistent driver of ESG advancement. Military expenditure can also support sustainability by reinforcing institutional stability, particularly in developing and upper-middle-income countries. Economic factors such as foreign direct investment, industrialization, and human capital show context-dependent effects, whereas globalization and natural resource rents generally enhance ESG performance, and inflation tends to constrain it. Overall, the findings underscore the importance of tailored, context-specific sustainability policies, showing that effective ESG progress depends on the interaction between institutions, economic structures, and global integration.