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In recent years, European banks have been required to integrate environmental and social objectives into their business practices. At the same time, they have become increasingly exposed to environmental, social and governance (ESG) controversies. This paper empirically examines the relationship between the board characteristics of banks (i.e. size, gender diversity, meeting frequency, sustainability compensation incentives and the presence of a sustainability committee) and exposure to ESG-related controversies.

The empirical analysis focuses on a sample of 61 European banks between 2012 and 2021. Employing generalized method of moments (GMM) estimation, the authors examine the relationship between board characteristics and ESG controversies.

The results of the study indicate that banks featuring certain board characteristics (i.e. larger and more gender-diverse boards, facing sustainability compensation provisions and having sustainability committees) experience lesser exposure to ESG controversies. Additionally, the authors ascertain that prior instances of ESG controversies play a role in influencing current levels of such controversies. This result highlights the relevance of a bank's historical trajectory.

The authors' sample contains banks based in the European Union (EU). Future research should broaden the analysis to encompass banks operating in other advanced countries, as well as in emerging countries. This expansion would offer more insights into the relationship between board characteristics and ESG controversies under different regulatory frameworks.

The authors' findings provide relevant implications for several stakeholders, including shareholders, regulators and supervisors. Certain board characteristics should be taken into consideration to limit exposure to ESG controversies.

To the best of the authors' knowledge, this paper represents the first attempt to provide evidence of the link between strong corporate governance standards and reduced exposure to ESG controversies.

This paper aims to investigate the effect of environmental, social and governance (ESG) controversies on the cost of equity (COE) capital, exploring the moderating role of both positive ESG performance and market securities regulation.

This paper adopts a sample of 2,599 time observations related to European listed companies for which the authors examine a set of 30 negative ESG scores across the three pillars in terms of controversies, compliance and other negative issues. This study uses the average of seven implied COE estimates.

The results show that negative ESG performance, particularly environmental controversies, increases the COE, although this impact is mitigated when associated with company efforts to improve environmental performance. Besides, environmental controversies are likely to increase the COE in countries where the market regulation is stronger, as a consequence of higher investors’ expectations towards the scrutiny role of more efficient markets against companies’ controversies.

Companies should take care seriously of environmental issues such as biodiversity, product impact and resource impact, because investors do react accordingly. As despite no direct effects of positive ESG performance are observed in terms of COE reduction, the mitigating role on the ESG controversies–COE relationship makes ESG practices still significant for European investors.

The effects of ESG performance on company financial performance should be investigated under the assumption that bad events weight more than positive ESG performance.

Because no prior studies have specifically assessed the effect of the European listed companies’ ESG controversies on their COE, this paper delivers insights into the relationship between positive and negative ESG performance and their effects on capital market financing.

With the increasing understanding of stakeholders on sustainability aspects for the business, companies are nowadays paying more attention to environmental and social issues. This study aims to examine the relationship between Environmental, Social, Governance (ESG) Index and firms’ value. Moreover, this study also examines how the controversy score influences the company’s value. The authors employ a dataset of 1.356 companies from 22 countries in Asia which representing the Asian market from 2014 to 2018. This study shows that ESG index score and controversy score are statistically significant, affecting the firms’ value, measured by Tobin’s Q. From the individual tests, the findings of this study indicate that ESG-environmental, ESG-social, and ESG-governance, individually affect the firms’ value. This study suggests that providing disclosure on ESG aspects is essential, not only to increase company value but also to show the company resilience and sustainability. On the other hand, ESG controversy score surprisingly indicates a positive relationship with the company value. The result implies that controversies provide a positive signal to the investor because controversies could provide a signal to the public of companies’ willingness to have transparency and accountability.

This study aims to investigate the relationship between board gender diversity and environmental, social and governance (ESG) controversies and to determine if a critical mass of female directors has a significant impact on ESG performance.

The study analyzes a sample of non-financial companies from 13 European countries between 2004 and 2021. The primary method used to reach conclusions was the pooled ordinary least squares regression. Additionally, the study used supplementary techniques such as alternative measurement, sub-sample analysis and two-stage least squares to enhance its reliability.

The results indicate that a higher representation of women on boards is correlated with a reduction in the number of ESG controversies, particularly when there are three or more female directors. Furthermore, the relationship between board gender diversity and ESG controversies may be affected by factors such as industry, governance and a company’s environmental performance.

This study suggests that increasing women’s representation on boards may mitigate ESG controversies and improve firm reputation and performance, especially in industries with high ESG risks. Policymakers can support this through policies, targets, training and inclusive practices. The findings also inform investors and stakeholders of the relationship between board gender diversity and ESG controversies.

This study expands the understanding of the relationship between board gender diversity and sustainable accounting and finance. It focuses on the effect that having female board members has on corporate policies, which is significant for shaping global policies that promote diversity on boards.

The purpose of this study is to develop a method to assess social performance. Traditionally, environment, social and governance (ESG) rating providers use subjectively weighted arithmetic averages to combine a set of social performance (SP) indicators into one single rating. To overcome this problem, this study investigates the preconditions for a new methodology for rating the SP component of the ESG by applying machine learning (ML) and artificial intelligence (AI) anchored to social controversies.

This study proposes the use of a data-driven rating methodology that derives the relative importance of SP features from their contribution to the prediction of social controversies. The authors use the proposed methodology to solve the weighting problem with overall ESG ratings and further investigate whether prediction is possible.

The authors find that ML models are able to predict controversies with high predictive performance and validity. The findings indicate that the weighting problem with the ESG ratings can be addressed with a data-driven approach. The decisive prerequisite, however, for the proposed rating methodology is that social controversies are predicted by a broad set of SP indicators. The results also suggest that predictively valid ratings can be developed with this ML-based AI method.

This study offers practical solutions to ESG rating problems that have implications for investors, ESG raters and socially responsible investments.

The proposed ML-based AI method can help to achieve better ESG ratings, which will in turn help to improve SP, which has implications for organizations and societies through sustainable development.

To the best of the authors’ knowledge, this research is one of the first studies that offers a unique method to address the ESG rating problem and improve sustainability by focusing on SP indicators.

Gender diversity in corporate boards is broadly studied in existing corporate governance literature. However, the role of board gender diversity on environmental, social and governance (ESG) performance of the banks is still unaccounted for. Drawing on resource dependence and legitimacy theory, this study addresses this pressing research issue. Moreover, investigation of ESG controversies as a moderator paves the existing corporate governance research to the new avenues.

Data were sourced from Refinitiv database on 37 US banks from the period of 2013 to 2017. This study employs static and dynamic panel regression models that include random effects, fixed effects and dynamic generalised method of moments (GMMs) to test the hypotheses. Furthermore, system GMM is used to reduce the issue of endogeneity, measurement error, omitted variables bias and bank-specific heterogeneity.

We identify a significant positive relationship between board gender diversity and the ESG performance of US banks. However, the result propounds non-significant moderating effect of ESG controversies on the board gender diversity–ESG performance nexus.

Literature on board gender diversity and ESG separately and predominantly explains firm/bank's financial performance. This study is one of the pioneering attempts to explain the role of board gender diversity on ESG performance. Although incremental, however, this study also contributes to the literature on ESG in the US context.

Based on the agency and resource dependence theories, this study aims to investigate whether nomination committee (NC) characteristics could serve as key attributes for reducing environmental, social and governance (ESG) disputes and whether NC composition affects the appointment of ESG-friendly directors to the board.

This study focuses on a sample of 30 global systemically important banks from 2015 to 2021. The authors estimate panel data models with fixed effects, clustering heteroskedastic standard errors at the bank level to account for the serial correlation of the dependent variables for each bank.

Banks’ exposure to ESG controversies can be reduced when NC members have specific skills, in particular when at least one member of this committee also belongs to the sustainability committee and is a foreign director. Moreover, banks’ ESG disputes decrease when the NC members are younger, while the share of independent NC members has a negative impact. Finally, a positive influence of NC composition and its members’ features as well as the appointment of ESG-friendly directors on the board is found.

The findings are particularly useful during periods such as the current one, when there is growing attention to both banks’ corporate governance, the subcommittees’ role and functioning and social and environmental issues. This study shows that the NC is important in reducing the likelihood of banks incurring ESG disputes and in appointing more ESG-friendly directors. NC effective functioning and its members’ qualities serve as a key attribute for fulfilling objective assessment and improving board effectiveness.

This study aims to investigate the effects of board attributes, i.e. board independence, gender diversity, board size and board activity, on the sustainability performance of 439 publicly-listed non-financial companies across 20 emerging countries over the period of 2010–2019.

We use Refinitiv environmental, social and governance (ESG) performance scores and board attributes variables derived from Thomson Reuters Eikon database. We examined the relationship between board features and sustainability performance by using the dynamic panel two-step system generalized method of moments estimator.

Overall, our findings suggest that smaller, gender diverse and independent boards that convene frequently achieve better sustainability performance. The authors document a positive relationship between board gender diversity and sustainability performance across a broad spectrum of sustainability indicators. The authors also find evidence that board independence has a positive impact on two sustainability performance measures, i.e. environmental and governance performance. Although board size does not influence aggregate sustainability measures (ESG score, ESG controversies, and ESG combined score), the authors find a negative relation between board size and governance performance. Finally, board activity seems only relevant in explaining ESG controversies, i.e. other things being equal frequently held board meetings significantly reduce sustainability issues (ESG controversies).

The authors’ findings provide implications to support regulators and emerging market companies on how to improve sustainability performance through the design and use of specific governance mechanisms. These interventions will help resolve agency problems among different stakeholders and, in turn, benefit sustainability.

This study also has social implications because it sheds light on how companies may change their attitudes towards sustainable practices through adjusting their corporate governance structures to increase the welfare of the society.

This study examines the behaviour of companies in emerging markets on sustainability performance by discussing a broad range of board characteristics and covering a large sample of emerging markets. Thus, it provides valuable insights to the companies for further growth opportunities in emerging markets.

This paper aims to investigate how a US firm’s political landscape affects the integration of environmental, social and governance (hereafter ESG) measures in CEO compensation contracts, thereby affecting the firm’s ESG performance and credit rating.

Based on the results of state senatorial and presidential elections and the location of a US firm’s headquarters, the authors categorize whether a firm has a political environment that is predominantly Democratic (blue) or Republican (red). The empirical analyses are based on a sample of US firms in the period 2014–2021.

The authors find that firms in blue states are more likely to link CEO compensation to ESG performance measures. Further, the results show that firms in blue states with ESG-linked compensation contracts have better ESG performance. Lastly, the authors find evidence that a firm’s ESG performance has a positive impact on its credit rating, but the impact is weakened if firms in red states link ESG performance to executive compensation.

To the best of the authors’ knowledge, this is the first research that explores how a firm’s political environment affects the use of ESG performance measures in CEO compensation contracts. Furthermore, the authors contribute to the literature by showing evidence that the political environment interacts with the impact of ESG-linked compensation incentives on the firm’s ESG performance and, thus, its credit rating.

The purpose of this paper was to study the direct impact of audit quality on environmental, social and governance (ESG) transparency. It aimed also to investigate the moderating effect of media coverage on the relationship between audit quality and ESG transparency in the USA.

The sample consisted of US companies listed in the Standard and Poor’s 500 Stock Index between 2010 and 2019. The Thomson Reuters database was used to collect ESG disclosure scores and governance information. The authors applied multiple panel data regressions.

The results showed that audit quality has a direct positive effect on ESG transparency. The findings also showed that the high exposure to public media by firms, the more they commit to high audit quality leading to disclose more transparent ESG information.

The results illustrated the significance of an external audit on an organization’s ESG report. Second, improving data quality has significant consequences not only for rating agencies but also for investors, businesses and researchers. These steps are required to increase the information content of ESG ratings.

The findings demonstrated that third-party external verification improves the dependability of nonfinancial reporting, hence bridging the confidence gap between corporations and the market regarding sustainability reporting.