In theory, stock markets may be a useful vehicle for encouraging corporate sustainability because they are interact with and affect a large number of companies. There is a growing presence of sustainability initiatives and investments in stock markets, including the UN’s Sustainable Stock Exchange Initiative (SSE). Several stock exchanges have their own form of ESG regulation, which can take on a range of both rules-based and principles-based approaches. New stock markets, such as the Luxemburg Green Exchange (LGX), that focus specifically on ESG disclosure are also emerging. All of these efforts to encourage corporate sustainability can be implemented by public regulators of stock exchanges or the stock exchanges themselves.
As ESG disclosure regulation is being implemented privately throughout stock exchanges and publicly through securities regulators, what relationship do the regulations have on company-level ESG performance? This project explores whether companies incorporated in a country with required ESG disclosure regulation and listed in stock exchanges with required ESG disclosure regulation perform better than those who are not. By examining the impact of public securities and private stock market regulation on the quality of ESG performance, we investigate the effects of these regulatory approaches and whether either is a more effective information-based governance strategy.