Uncovering the asymmetric impact of ESG on ASEAN stock markets

Purpose Environmental, social and governance (ESG) practices play a crucial role in advancing green recovery by promoting sustainable and responsible economic development. This paper aims to investigate the impact of ESG on the stock markets of the association of southeast asian nations (ASEAN)-6 economies: Indonesia, Malaysia, Singapore, Vietnam, Thailand and the Philippines. Design/methodology/approach This study uses Kernel Regularized Least Squares (KRLS) and Cross-Quantilogram Correlation (CQC) methods. Findings The KRLS findings indicate that ESG significantly influences stock market performance in these countries, underscoring the importance of sustainable practices. In Vietnam, the Philippines and Singapore, ESG exerts a positive effect, although the strength of this effect varies across market states. Notably, the asymmetric influence suggests that ESG contributes positively to stock performance under favorable market conditions but may have a weaker or even negative impact during downturns. The CQC results further reveal both positive and negative associations between ESG and ASEAN-6 stock markets. Practical implications The study yields actionable recommendations for ESG implementation and risk control, targeting primary stakeholders in emerging markets such as investors and policymakers. Originality/value This paper advances research on the impact of ESG on stock markets in the ASEAN region by providing empirical evidence of asymmetric relationships between variables across different market scenarios. Additionally, this paper uses CQC and KRLS methods to examine how ESG performance correlates with stock market returns across different quantiles, offers robust insights into the ESG–stock market nexus and contributes to the advancement of analytical tools in this domain.