The impact of ESG on economic growth: Evidence from BRICS+ countries

Using a panel autoregressive distributed lag (ARDL) model, this paper investigates the impact of environmental, social and governance (ESG) factors on economic growth across BRICS+ countries from 2002 to 2022. The model allows analysis of both short- and long-run effects. We develop an index comprising 17 ESG variables across all three components to study the relationship between ESG and growth. Empirical results show a positive long-run association between ESG and growth for the BRICS+ bloc, however no detectable short-run dynamics. We also find no evidence of a long-term ESG effect on growth for the new member countries that joined in January 2024. This suggests these new members should prioritise developing ESG-related policies. Furthermore, we use a panel nonlinear ARDL (NARDL) model to identify asymmetric effects. Our findings reveal that there are differences in how economic growth responds to positive and negative changes related to ESG factors, highlighting the need to consider asymmetries in the ESG-growth nexus. Finally, the results of this study offer valuable insights to policymakers seeking to promote sustainable development in BRICS+ countries.