Determinants and effects of country ESG controversy

This paper provides a new perspective on the economic implications of Environmental, Social, and Governance (ESG) ratings. Using data for 152 countries, we introduce a new country measure which reflects controversies regarding ESG performance based on media coverage in real time. We evaluate our measure at the country and global level and over different frequencies and illustrate that global ESG controversy is positively related to established policy uncertainty measures but also displays distinct dynamics. In a second step, we evaluate cross-country determinants and show that political determinants, the structure of the energy sector and GDP per capita affect ESG controversies. Finally, we show that ESG controversery displays significant effects on the global level.