This study investigates how disaggregated environmental, social, and governance (ESG) indicators are associated with firm value, stock returns, and the cost of capital, emphasizing the moderating role of ESG controversies. Using panel data of publicly listed firms in the Asia-Pacific region from Refinitiv and applying firm and year fixed effects with forward-looking specifications (t to t + 3), the results show that the ESG–performance association is neither uniform across indicators nor stable over time: several environmental indicators lose statistical relevance beyond the short horizon, while selected social and governance indicators remain associated with outcomes only where materiality is high. The central finding is that ESG controversies do not merely add explanatory power but systematically reshape these relationships—attenuating or reversing the association between ESG and firm value or returns, while strengthening the association with the cost of capital. This pattern indicates that ESG is priced by the market only when it is perceived as credible, underscoring reputational risk—rather than ESG performance itself—as the dominant mechanism linking sustainability information to firm outcomes.
Suhasmoro et al. (Mon,) studied this question.