Do International Financial Centres enable circular economy investment? Firm-level evidence from BRICS economies

This study investigates whether firms headquartered in International Financial Centres (IFCs) exhibit greater commitment to circular economy practices, as reflected in resource and energy efficiency performance. Focusing on a matched panel of 60 listed firms across BRICS economies (Brazil, Russia, India, China, and South Africa) from 2018 to 2024, the study spans three CE-relevant sectors: manufacturing, utilities, and materials. We introduce the Circular Energy Transition Index (CETI) as a novel composite proxy capturing the energy transition dimension of circular economy engagement, constructed using Bloomberg ESG indicators on energy consumption, electricity use, and renewable energy integration. Grounded in institutional theory and the resource-based view, we hypothesize that IFCs, by virtue of their advanced regulatory infrastructure, ESG norms, and sustainability-oriented investors, act as institutional enablers amplifying firm-level capabilities for circular transition. A diagnostics-driven methodology is adopted. Ordinary Least Squares (OLS) regression is used for baseline estimation, followed by permutation testing for robustness, and Random Forest regression for interpretability and predictive strength. Findings reveal while IFC location alone is not a dominant predictor, it consistently ranks among the top variables explaining CETI variation, after profitability and firm size. This suggests that IFCs enhance circular investment only when firms possess adequate internal resources.