ESG and Pakistan: the good and the bad

The world is more susceptible to extreme natural disasters and environmental issues; therefore, the business landscape in Pakistan must evolve while remaining environmentally conscious. Firms must incorporate sustainability strategies into their planning and instil actions that make them more economically and environmentally resilient. This study aims to conduct a sector-wise analysis of the environmental, social, and governance (ESG) measures and their effect on the stock performance of 101 firms listed on the Pakistan Stock Exchange from 2009 to 2019. For this purpose, the study constructs an ESG index and employs the GMM technique to examine the effect of ESG factors on the firm's stock performance. Using profitability measures, ESG combined and separate scores with a period lag show a positive but weak significant coefficient. Considering the firm value, the ESG combined and separate scores with a period lag positively influence Tobin's Q, except for environmental factors. Considering the weighted average cost of capital (WACC) and ESG linkages, the ESG combined and separate scores with a period lag influence WACC negatively except for social factors. The study's findings are consistent with the previous literature, which supports the catalyst effect of ESG compliance on the performance of firms.

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Publication Details

Journal
Afro-Asian J of Finance and Accounting
Published
2025-12-19
DOI
https://doi.org/10.1504/aajfa.2026.150616
Primary Topic
Corporate Social Responsibility Reporting
Type
article
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article

ESG and Pakistan: the good and the bad

Olan Naz, Muhammad Zubair Mumtaz
Afro-Asian J of Finance and Accounting
Corporate Social Responsibility Reporting
article

ESG and Pakistan: the good and the bad

Olan Naz, Muhammad Zubair Mumtaz
article en

Abstract

The world is more susceptible to extreme natural disasters and environmental issues; therefore, the business landscape in Pakistan must evolve while remaining environmentally conscious. Firms must incorporate sustainability strategies into their planning and instil actions that make them more economically and environmentally resilient. This study aims to conduct a sector-wise analysis of the environmental, social, and governance (ESG) measures and their effect on the stock performance of 101 firms listed on the Pakistan Stock Exchange from 2009 to 2019. For this purpose, the study constructs an ESG index and employs the GMM technique to examine the effect of ESG factors on the firm's stock performance. Using profitability measures, ESG combined and separate scores with a period lag show a positive but weak significant coefficient. Considering the firm value, the ESG combined and separate scores with a period lag positively influence Tobin's Q, except for environmental factors. Considering the weighted average cost of capital (WACC) and ESG linkages, the ESG combined and separate scores with a period lag influence WACC negatively except for social factors. The study's findings are consistent with the previous literature, which supports the catalyst effect of ESG compliance on the performance of firms.

Afro-Asian J of Finance and AccountingVol. 16(1)
University of Bahrain (BH), National University of Sciences and Technology (PK)
Openalex Percentile: Top 44%
Corporate Social Responsibility Reporting
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ESG and Pakistan: the good and the bad — Olan Naz, Muhammad Zubair Mumtaz · Afro-Asian J of Finance and Accounting (2025) | TGRS Research Map | TGRS