The Importance of Country-Level ESG Scores

Environmental sustainability is more important than social and governance pillars. Analyzing cross-border banking flows into real-sector firms across 26 developed countries from 2006 to 2017, the study finds a positive and significant relationship between country-level sustainability scores and banking flows. Using dynamic panel regression methods, this finding aligns with signaling theory, suggesting that a country's sustainability score attracts more international fund flows.