STATEMENT OF AUTHORSHIPI would like to confirm that the topic "The influence of Environmental, Social, andGovernance Factors Matter for Foreign Direct Investment: "Evidence from Asian co
Significance of the cố
In recent decades, the global economy has seen remarkable growth, resulting in enhanced living standards across various regions The World Bank highlights this positive trend, emphasizing the widespread benefits of economic development.
From 1990 to 2019, the Gross Domestic Product (GDP) surged from approximately $31.7 trillion to $85.8 trillion, fueled by globalization, technological advancements, and heightened productivity Nonetheless, this swift economic growth has also led to considerable challenges, including increased pollution and climate change, impacting both life and the environment.
Economic development has been linked to significant negative environmental impacts, including air pollution that contributes to millions of premature deaths annually (Lelieveld et al., 2019) The overexploitation of natural resources and deforestation pose serious threats to the planet's long-term sustainability (WWF, 2021) It is crucial to prioritize environmental awareness and protection alongside economic growth, ensuring that progress does not lead to environmental degradation Collaboration among governments, businesses, and individuals is essential to mitigate these challenges and implement sustainable development practices that align with economic objectives while safeguarding global health and well-being.
Sustainable development is essential for balancing present needs with the future's, emphasizing minimal environmental harm, social welfare, and economic growth Collaboration among governments, businesses, and citizens is crucial to avoid long-term negative impacts on the planet As sustainability becomes integral to our lifestyles, it also influences our investment strategies The focus on Environmental, Social, and Governance (ESG) criteria highlights companies' accountability and their commitment to positive societal and environmental impacts, thereby enhancing their competitive edge and attracting sustainability-minded investors.
As society evolves, environmental pollution, the greenhouse effect, and health risks like the Covid-19 pandemic are escalating Multinational corporations are adopting a holistic sustainability approach to ensure long-term operations and mitigate uncertainties Consequently, sustainable investing is gaining traction as investors increasingly recognize the importance of environmental, social, and governance (ESG) factors in their investment choices.
JP Morgan (2020) emphasizes the urgent need for enhanced actions to safeguard businesses and society against long-term sustainability threats, identifying the Covid-19 pandemic as a critical "wake-up call" for economic policymakers and investors to adopt sustainable investment strategies Research by Olmedo, Torres, and Izquierdo (2010) indicates that ESG (Environmental, Social, and Governance) concerns are increasingly capturing the attention of investors, particularly younger demographics As countries focus more on ESG factors, these issues are emerging as global challenges, as noted by the United Nations (2015) Responsible governments are expected to implement policy-making programs and regulations that protect the environment, enhance citizen well-being, and foster social cohesion Schultz (2020) reports that by 2018, investments totaling around $12 trillion were made using socially responsible investment strategies, highlighting the growing significance of ESG considerations in investment decisions.
According to the US SIF Fund (2020), the consideration of ESG factors by investors has surged by 42% since 2018, with ESG-based sustainable investments now representing one-third of all privately invested assets in the United States The rise of ESG-focused exchange-traded funds (ETFs) reflects the financial services industry's response to growing demand for these investments As ESG factors increasingly shape the business landscape, they are likely to influence foreign direct investment (FDI) inflows (Satyabrata et al., 2021) Companies that embrace sustainable practices and prioritize ESG considerations not only mitigate environmental and social risks but also enhance their overall investment appeal.
Sustainability practices and ESG factors are increasingly recognized by governments, leading to the implementation of policies that encourage companies to adopt these principles This focus on sustainability not only enhances corporate reputation and brand value but also creates a competitive advantage for countries prioritizing these practices As a result, nations fostering a favorable business environment for sustainable initiatives are better positioned to attract foreign direct investment (FDI), as investors are increasingly drawn to companies committed to addressing these critical issues.
Foreign direct investment (FDI) is crucial for fostering economic growth, as it creates jobs, boosts incomes, and provides access to new markets, technologies, and capital FDI can be categorized as market-seeking, natural-resource-seeking, or strategic-asset-seeking, promoting competition and innovation that enhance productivity and efficiency Additionally, FDI generates foreign exchange earnings, which can help with imports and reduce national debt Consequently, it is vital for governments to implement policies that attract FDI However, from 2002 to 2021, FDI inflows experienced a significant decline, particularly due to the Covid-19 pandemic, which reduced global FDI flows from 5.4% of GDP in 2007 to just 1% in 2020 Despite this, Asian countries demonstrated resilience with a 4% increase in FDI inflows The pandemic also negatively impacted investment related to the Sustainable Development Goals (SDGs), with green investments in developing regions dropping by 33%, highlighting the importance of FDI in financing these initiatives.
Foreign direct investment (FDI) significantly influences a country's development across environmental, social, and governance (ESG) dimensions While FDI can stimulate economic growth and job creation by introducing capital, technology, and expertise, it may also lead to negative outcomes like environmental harm, social inequality, and governance issues if not properly regulated Understanding the role of ESG factors in FDI decisions is crucial for aligning investments with sustainable development goals By prioritizing ESG considerations, policymakers and investors can ensure that their FDI activities support the long-term well-being of the host country and its communities.
The recent decline in foreign direct investment (FDI) inflows presents significant challenges to the sustainable development goals of many countries, particularly those in the developing world that rely heavily on this capital While existing studies have explored the connection between FDI and economic growth, there is a notable gap in research regarding the impact of Environmental, Social, and Governance (ESG) factors on FDI from a macro-country perspective This article, titled "The Influence of Environmental, Social, and Governance Factors on Foreign Direct Investment: Evidence from Asian Countries," aims to investigate the relationship between ESG factors and FDI inflows in Asian nations It will analyze how these factors affect foreign investors' decision-making processes and discuss the implications for policymakers and investors involved in FDI decisions within the region.
Objectives of the SEUdy . cv tk HH HH HH H111 111111 1111 grke 4
This article aims to systematically explore the relationship between environmental, social, and governance (ESG) factors and Foreign Direct Investment (FDI) from a national perspective It will develop a model to measure the impact of ESG on FDI in Asian countries from 2002 to 2021 The analysis will identify gaps and inadequacies in this relationship, offering recommendations for investors, business leaders, and government agencies to enhance resource mobilization Ultimately, this research seeks to support the achievement of Sustainable Development Goals (SDGs) and foster sustainable economic growth in the region.
To what extent do environmental, social, and governance (ESG) factors influence foreign direct investment (FDI) in Asian countries?
How do Asian countries perform in terms of incorporating environmental, social, and governance factors in their policies and practices to attract foreign investment?
How can policymakers and investors leverage this relationship to promote sustainable development?
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ESG factors encompass indicators related to the environment, society, and governance, and their influence on foreign direct investment (FDI) in Asian countries.
Spatial scope: The study examines the link between Foreign Direct Investment (FDI) and environmental, social, and governance (ESG) factors in 48 Asian countries.
Time Scope: Using publicly available World Bank data from 2002-2021.
Methods of the SEUỞV ôcọ HH nà nà Hà Hà Hà HH KH HH TH th ty thành nhàng 5 1.6 The layout of the topic
The study employs a quantitative research method.
Recent studies, both domestic and international, have identified key variables and their impacts related to the topic Data on Foreign Direct Investment (FDI) and Environmental, Social, and Governance (ESG) metrics for Asian countries were sourced from the World Bank.
The research paper utilized Excel software for data collection and calculation of key indicators, followed by Stata 14 for data description and model testing, ensuring the accuracy of the results.
1.6 The layout of the topic
Chapter 1: Significance of the Study
Chapter 2: Research overview and theoretical basis.
Contribution of the topic
This article addresses the gap in literature regarding the relationship between Environmental, Social, and Governance (ESG) factors and Foreign Direct Investment (FDI) by examining all three ESG components and their influence on FDI inflows Unlike previous studies that focused on macroeconomic variables or limited aspects of sustainability, this research analyzes a comprehensive set of ESG factors and the Sustainable Development Goals (SDGs) index across 48 Asian countries from 2002 to 2021 The findings highlight the positive impact of ESG factors on FDI, underscoring their significance in investment decisions and policy planning By expanding the scope of research, this study contributes valuable insights into attracting foreign investment and achieving sustainable economic growth aligned with global sustainability objectives.
LITERATURE REVIEW T 4A
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2.1.1 Overview of research in the world
Previous research has predominantly examined how macroeconomic variables influence foreign direct investment (FDI) and its subsequent effects on economic growth Key determinants of FDI identified by Mugableh (2014) include money supply, consumer price index, exchange rate, gross domestic product, and trade Additionally, studies by Adhikary (2011) and Jadhav (2012) highlight the importance of fundamental macroeconomic principles such as exchange rates and inflation on FDI Furthermore, Asiedu (2006) and Jadhav (2012) emphasize that institutional and political factors also play a crucial role in attracting FDI Conversely, Suleiman et al (2015) illustrate the positive relationship between FDI and economic growth.
Research on the relationship between social, environmental, and governance (ESG) factors and foreign direct investment (FDI) is limited, with most studies focusing on ESG's impact on investment portfolios and corporate performance Chris and Oikonomou (2017) found that ESG practices enhance company stock prices, while Muhammad et al (2022) demonstrated a positive correlation between ESG disclosures and financial performance, as indicated by earnings per share (EPS) Conversely, research by Edmund et al (1997) and Hassel et al (2005) indicated that environmental disclosures could negatively affect market value, as investors may worry that social responsibility initiatives lead to higher costs without mitigating risks Additionally, studies by Alexander (2019) and Murray et al found no significant impact of ESG disclosure on market value.
(2005), because the authors believe that investors do not consider environmental and governance disclosures for investment purposes, and therefore, it does not affect stock prices.
Numerous studies have examined the link between specific sustainable factors and foreign direct investment (FDI), rather than considering the broader aspects of Environmental, Social, and Governance (ESG) criteria Pao and Tsai (2011) highlight a robust two-way causal relationship between CO2 emissions and FDI Additionally, Behera and Dash (2017) indicate that FDI significantly influences CO2 emissions in the Southeast Asia region (ASSEA) Lau et al (2014) further suggest that FDI may lead to heightened industrial pollution and environmental degradation.
Research indicates a complex relationship between foreign direct investment (FDI) and environmental regulations While some studies, such as those by Spatareanu (2007) and Wheeler (1997), suggest that stricter environmental regulations can attract FDI, others, including Levinson (2009), Henna (2010), and OECD (2011), argue that countries with more lenient environmental standards may experience increased FDI flows Additionally, Marconi (2013) found no evidence linking pollution levels to FDI in China and Europe, and Rezza (2014) highlights the ongoing debate and lack of consensus regarding the impact of environmental regulations on FDI.
Numerous studies highlight the positive correlation between human capital and economic development, particularly in the context of foreign direct investment (FDI) Research by Spiegel et al (1994) and Sharma & Gani (2004) indicates that FDI contributes to improvements in the Human Development Index (HDI) Borensztein (1998) emphasizes that human capital enhances productivity in FDI, while Liu and Li (2005) assert its crucial role in fostering economic growth in developing nations Adhikary (2011) further supports this by identifying an educated labor force as a key factor attracting FDI However, contrasting findings by Iamsiraroj (2016) reveal a negative correlation between the labor force and FDI flows, suggesting a more complex relationship.
Limited research exists on the connection between ESG factors and FDI inflows However, Wang, Yu, and Zhong (2020) highlight a significant positive effect of enhanced national ESG performance on economic growth and FDI Similarly, Crifo, Diaye, and Ooughlessi (2017) demonstrate that strong ESG ratings can lower government debt costs, facilitate financial investments, and attract FDI Additionally, Noor et al (2018) identify a positive correlation between environmental, social, and governance factors and FDI inflows.
Research by Niranjan et al (2021) indicates that Environmental, Social, and Governance (ESG) factors negatively impact Foreign Direct Investment (FDI) inflows in Malaysia Specifically, a high Human Development Index (HDI) score tends to restrict FDI, while increased FDI is linked to higher carbon emissions Conversely, FDI is positively correlated with nations that exhibit strong governance practices.
As public interest in ESG practices and corporate transparency grows in Vietnam, researchers are increasingly focusing on ESG disclosure Nguyen and Luu (2020) highlight that foreign direct investment (FDI) contributes to rising CO2 emissions in Vietnam, with a long-term asymmetric effect influenced by both current and past FDI levels In contrast, Pham (2019) finds that while stricter environmental regulations may initially reduce FDI inflows, they can ultimately attract more investment over time by demonstrating a country's commitment to sustainable development.
Research indicates that while foreign direct investment (FDI) can positively influence CO2 emissions in the short term, its long-term effects are negligible Studies, including those by Le (2018), Do (2020), and Dang et al (2021), highlight FDI's beneficial impact on human resource quality Additionally, Cao and Nguyen (2017) demonstrate that high institutional quality attracts FDI, which in turn can enhance institutional standards Bui and Hoang (2017) also find a positive correlation between management quality and FDI attraction Conversely, Huynh (2021) reveals that government efficiency and law enforcement quality negatively affect FDI attraction.
2.2 Theoretical basis on the impact of environmental, social, and governance
(ESG) factors on Foreign Direct Investment FDI
2.2.1 The concept of ESG (Environmental - Social - Governance)
The concept of ESG, introduced in the groundbreaking 2004 study "Who Cares Wins" by Ivo Knoepfel, emerged during a pivotal United Nations conference aimed at integrating environmental, social, and governance factors into wealth management and financial research In under two decades, this initiative has evolved from a UN framework for corporate social responsibility into a significant movement influencing investment strategies worldwide.
The ESG (Environmental, Social, and Governance) approach has evolved into a global phenomenon, encompassing three key components The environmental aspect assesses a company's impact on the environment, focusing on factors like carbon footprint, energy efficiency, waste management, and water usage The social component evaluates the company's influence on society, including labor practices, human rights, diversity and inclusion, and community engagement Finally, the governance aspect examines how a company is managed, considering board structure, executive compensation, shareholder rights, and business ethics.
2.2.2 The development of ESG (Environmental - Social - Governance)
Institutional investors initially resisted integrating ESG considerations into their investment strategies, claiming that investment trustees did not assign them this responsibility and that their actions were constrained by their values and financial factors However, substantial evidence indicates that ESG issues are fundamentally financial, particularly in leading markets.
The US and the European Union (EU) have made Environmental, Social, and Governance (ESG) a key responsibility for asset management organizations as mandated by trustees A significant challenge in advancing ESG investments is the insufficient data and tools available for companies to accurately measure and meet their objectives Nevertheless, the establishment of the Global Reporting Initiative (GRI) marks a pivotal step towards addressing these challenges.
Since 2000, ESG disclosure has significantly evolved, with 80% of the world's largest companies now adhering to GRI standards Additionally, the Sustainability Accounting Standards Board (SASB) in the US and the Global Integrated Reporting Initiative (IIRC) have recently enhanced reporting practices, further advancing transparency in sustainability efforts.
Since 2013-2014, ESG investment activities have gained significant momentum, highlighted by studies indicating that sustainable governance correlates with improved public performance Economists like George Serafeim, Bob Eccles, and Ioannis Ioannou emphasize the critical role of ESG in risk management, operational efficiency, and corporate strategy enhancement Consequently, companies prioritizing sustainable development strategies have seen their stock performance surpass that of less ESG-focused firms.
RESEARCH METHODOLOGY 3.1 Data and i0 on 6
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Descriptive analysis utilizes statistics, tables, and figures to effectively summarize and illustrate various attributes of a sample One of its key advantages is the high level of objectivity and neutrality it offers This analytical approach is instrumental in assessing the influence of ESG disclosure on foreign direct investment (FDI).
The estimation methods for fitting models with tabular data include Pooled Ordinary Least Squares (Pooled OLS), fixed effects (FE), and random effects (RE) While Pooled OLS can provide accurate and efficient results regarding variation direction, it tends to overlook the influences of time series and cross-sectional data, which may result in potential issues.
This study explores 15 econometric concepts, including heteroskedasticity, autocorrelation, and cross-correlation By employing fixed-effects regression that accounts for both year and country, it aims to effectively capture unobserved heterogeneity across various time periods and nations, thereby minimizing the risk of omitted variable bias.
Based on related studies and the database the author has collected, and referring to the research results of Niranjan et al., (2021), the author proposes a model with the following variables:
Variable name Variable definition Source
Foreign Direct Investment | Investment from one country to another for | World Bank business purposes.
GDP Per Capita GDP per capita is a measure of economic | World Bank output per person
Gross Capital Formation Total investment in an economy to support | World Bank economic growth.
Trade Exchange of goods and services between | World Bank countries or regions for economic benefit
CO2 per capita Carbon dioxide (CO2) emissions produced by | World Bank an individual
HDI (Human Development | Measures key dimensions of human | UNDP Data Index) development Center
Control of corruption The efforts made by governments to prevent | World Bank and combat corruption effectively
SDGs Global goals for sustainable development, | Sustainable addressing key societal challenges Development
Gross Capital Formation (GCF) as a percentage of GDP is a key indicator of a country's domestic investment climate, reflecting total investments from both domestic and foreign sources A higher GCF/GDP ratio signals a favorable investment environment characterized by better financing access, infrastructure, and business conditions, while a lower ratio indicates challenges in these areas The relationship between foreign direct investment (FDI) and domestic investment can vary, with studies like Buchanan et al (2012) highlighting a generally positive correlation Additionally, GDP per capita growth reflects economic prosperity, suggesting that countries with higher growth rates are more attractive for investment opportunities Trade openness, measured by the percentage of trade in the economy, also plays a crucial role, with a more globalized economy likely to draw in FDI Lastly, the Sustainable Development Goals (SDGs) offer a framework for assessing sustainable development, addressing the social, economic, and environmental challenges faced globally.
In 2019, evidence emerged highlighting the positive influence of Foreign Direct Investment (FDI) on Sustainable Development Goals (SDGs) A key focus is on reducing CO2 emissions, which are a major contributor to the greenhouse effect and climate change Consequently, lowering CO2 emissions is essential for mitigating the human impact on the environment.
Governments and international organizations closely monitor CO2 emissions to ensure accurate measurement and reduction strategies Research by Lau et al (2014) and Behera and Dash (2017) indicates that lower CO2 levels are linked to higher Foreign Direct Investment (FDI), aligning with ESG trends The Human Development Index (HDI) serves as a key metric for assessing national development and guiding sustainable development decisions A positive correlation between HDI and FDI suggests that countries with higher HDI scores attract more investment, as noted by Li and Liu (2012) Furthermore, effective control of corruption is crucial for sustainable development, involving legal frameworks, enforcement, transparency, and public awareness Studies by Habib and Zurawicki (2002) and Wei (2000) reveal that corruption control measures can negatively impact FDI inflows in developing nations, supporting the hypothesis that corruption control adversely affects FDI.
Ln_FDI, = a+ bị CO2 Per Capital Emissions;, + b,x HDI,¿
Foreign Direct Investment (FDI) in Asian countries is influenced by several factors, including GDP per capita (GDPPC), government consumption as a percentage of GDP (GCFGDP), trade levels, and Sustainable Development Goals (SDG) The explanatory variables are represented by parameters b1, b2, b3, and b4, while 'a' denotes the constant in the formula, and 'e' indicates the standard error.
Hypotheses about the factors affecting the foreign direct invesf
According to stakeholder theory, legitimacy theory, and signaling theory, as supported by research from Niranjan et al (2021), Wang (2020), and Hubel (2020), countries that emphasize Environmental, Social, and Governance (ESG) factors are more likely to attract Foreign Direct Investment (FDI) and achieve long-term success Consequently, the author anticipates the hypothesis presented in Table 3.2.
Table 3.2 Hypotheses about the factors affecting the FDI
Variable Type Variable Name Meaningful Expected impact
Dependent FDI Foreign Direct Investment variables
Independent CO2PC CO2 Per Capita Emissions - variables
Control GCFGDP Gross Capital Formation + variables
GDPPC GDP per capita growth +
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Research indicates that ESG factors significantly enhance the ability to attract foreign direct investment (FDI) Companies are encouraged to incorporate ESG considerations into their decision-making processes and prioritize sustainability and accountability This includes establishing sustainability goals, measuring and reporting ESG performance, and engaging with local communities and stakeholders to align operations with community expectations By doing so, businesses can foster a positive perception among investors, which can lead to increased investment capital, improved business value, and enhanced profitability.
CO2 emissions negatively impact foreign direct investment (FDI), prompting companies to implement strict emission controls and develop environmental protection policies Investing in science and technology, along with training workers, enhances productivity and efficiency Embracing innovation and exploring sustainable technologies, renewable energy, and resource-efficient practices can lead to cost savings and improved competitiveness, potentially offsetting any negative perceptions regarding FDI Establishing robust sustainability reporting through frameworks like the Global Reporting Initiative (GRI) or the Sustainability Accounting Standards Board (SASB) allows businesses to transparently communicate their progress towards sustainable development goals (SDGs), alleviating investor concerns Additionally, promoting a strong image of social responsibility and adherence to environmentally friendly production standards can further attract foreign direct investment.
To incorporate ESG considerations into investment decisions, investors can use ESG ratings and other tools to assess a company's sustainability and responsible practices They can also
Investors are increasingly engaging with companies on Environmental, Social, and Governance (ESG) issues, leveraging their influence to promote sustainability and corporate responsibility When making investment decisions, it is crucial for investors to assess the conditions of the countries they are considering, opting for those that provide a secure environment for their asset structures.
Investors can collaborate with governments and stakeholders to enhance sustainability and urge companies to focus on ESG factors This partnership fosters a stable and predictable business environment, ultimately benefiting both investors and local communities.
By choosing to buy from companies that emphasize sustainability and corporate responsibility, customers can drive demand for these practices and inspire others to follow Engaging with companies through feedback on products and ESG issues fosters a more transparent and accountable business landscape, ensuring companies are held responsible for their societal and environmental impacts Furthermore, supporting government policies that promote sustainability can create a favorable business environment, making it an attractive destination for foreign direct investment (FDI).
Promoting Environmental, Social, and Governance (ESG) considerations fosters a sustainable business environment and attracts foreign direct investment (FDI) Governments can implement policies and regulations that encourage companies to prioritize sustainability and corporate responsibility, such as introducing sustainability frameworks and providing incentives Collaboration with investors and stakeholders is essential to enhance transparency and accountability, ensuring companies are responsible for their societal and environmental impacts Furthermore, supporting education and awareness initiatives can further promote ESG considerations in the business sector.
30 sustainability and encourage companies to prioritize ESG considerations By promoting a culture of sustainability, governments can help create a more sustainable and equitable society, which can become a major attraction for FDI.
The study indicates that Sustainable Development Goals (SDGs) negatively affect Foreign Direct Investment (FDI) Consequently, policymakers should create investment strategies that focus on specific SDGs that align with their nation's sustainable development priorities For example, a country striving to meet a particular SDG can tailor its investment approach to attract relevant FDI.
Policymakers should incentivize investments in renewable energy projects by fostering partnerships among government, investors, and society to promote sustainable investment practices aligned with the Sustainable Development Goals (SDGs) Enhancing access to information on sustainable investment opportunities, regulations, and policies is crucial for enabling informed decision-making by investors This includes providing insights into the social and environmental impacts, as well as the risks, benefits, and costs of specific investments Establishing sustainable investment standards will promote transparency and accountability, ensuring that investments are socially, environmentally, and economically sustainable Strengthening institutions and governance frameworks is essential for effectively implementing SDG policies and ensuring that investments benefit local communities and contribute to sustainable development.
This study highlights that many investors exploit the ineffective control of corruption in Asia to influence government decisions and secure illegal benefits through relationships rather than legal means The complexity of administrative processes creates avenues for corruption, underscoring the need for governments to streamline business registration, licensing, permits, and customs procedures to limit discretionary decision-making and reduce bribery opportunities Additionally, as corruption often crosses borders, international cooperation is essential in combating cross-border corruption and money laundering Governments should actively participate in global anti-corruption initiatives and collaborate with organizations like the United Nations, World Bank, and International Monetary Fund, as well as engage in anti-corruption conventions.
Improving governance through 31 agreements will enhance Asia's investment appeal by attracting high-quality projects from countries with transparent institutions Investors prioritize nations with strong governance to mitigate the risks of declining economic returns Consequently, strengthening corruption control will help reduce unhealthy and unsustainable foreign direct investment (FDI) projects.
The study has notable limitations that highlight the necessity for additional research It primarily focuses on Asian countries, which may limit the applicability of its findings to regions with distinct political, economic, and cultural contexts Furthermore, the influence of ESG factors on foreign direct investment (FDI) can fluctuate over time and context, with the study's data covering only the period from 2002 to 2021, potentially overlooking changes in the ESG-FDI relationship Additionally, reliance on secondary data sources raises concerns about data availability and quality, and the study fails to account for all relevant variables affecting the ESG-FDI connection Lastly, the research is based on correlation analysis, which does not establish a causal relationship between ESG factors and FDI.
Despite its limitations, the study offers valuable insights into the relationship between ESG factors and FDI Future research should broaden its scope by stratifying analyses based on industry, country, and context to explore the varying impacts of ESG As more data becomes available, researchers can assess the significance of ESG in attracting FDI by examining its composition Utilizing multiple data sources and employing data validation and sensitivity analysis will enhance the reliability of findings Collaboration with industry or country-specific experts can yield more precise data, leading to a clearer understanding of ESG's influence on FDI Ultimately, the author encourages future studies to advance this field and provide deeper insights.
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Sustainable investing is increasingly recognized for its significance, with a growing emphasis on environmental, social, and governance (ESG) factors in investment decisions The COVID-19 pandemic has highlighted the necessity for policymakers to adopt sustainable investment strategies Research indicates that ESG considerations are vital for attracting foreign direct investment (FDI), particularly in low and middle-income emerging markets As countries strive to meet the United Nations Sustainable Development Goals (SDGs), good ESG performance can enhance their ability to attract FDI and achieve sustainable economic growth The decline in global FDI flows, exacerbated by the pandemic, poses challenges for sustainable development, especially in developing economies that rely heavily on these inflows Understanding the relationship between ESG factors and FDI is crucial, as it can guide investments that align with high environmental and social standards, ultimately supporting the three pillars of sustainable development: economic, social, and environmental.
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