ESG Investments: a Study of Their Role in Risk Management and Sustainable Economic Growth

This study examines the relationship between leading global stock indices of top ESG-performing companies and a number of major economic factors, reflecting the growing popularity and importance of socially responsible investments. Using data from January 2011, to January 2023, we analyze MSCI ESG Leaders indices across diverse markets (USA, Europe, and Asia, Developed and Emerging markets). We integrate the Granger causality and Diebold-Yilmaz approaches to investigate interconnections and spillover effects. The results reveal significant interdependence between the indices, underscoring the important role of institutional frameworks for ESG market performance. The study emphasizes the critical role of ESG metrics in guiding investors and portfolio managers to effectively utilize ESG criteria, refine investment strategies, and manage risks. Furthermore, it emphasizes the necessity of fostering organizational cultures and institutional frameworks that support robust ESG index performance. Such an environment not only promotes overall economic development but also drives innovation and entrepreneurial activity. This approach enhances the understanding of how socially responsible investments contribute to sustainable economic growth and responsible investing practices.