Is economic growth in East Asia pacific and South Asia ESG factors based and aligned growth?

Abstract

Asia–Pacific countries are experiencing rapid economic growth. Is this growth ESG (Environmental, Social, and Governance) factors‐based and aligned growth? Therefore, this study investigates the connections between ESG indicators and economic growth in East Asia Pacific and South Asia. To achieve this aim, we employed the FMOLS, DOLS, and AMG models. While the AMG model highlights significant long‐term positive effects of the environmental (EFs) and governance factors (GOVNF) on economic growth, the FMOLS and DOLS models emphasize the substantial influence of social factors (SOC) on economic growth. These findings underscore the multifaceted nature of ESG factors and offer valuable insights for policymakers aiming to align strategies with the sustainable development goals (SDGs). Notably, the GOVNF, with components like control of corruption, regulatory quality, rule of law, and government effectiveness, does not influence the GDP of developed nations, such as Japan, New Zealand, and Australia. However, its significance is evident in countries like Afghanistan and Sri Lanka. This result might stem from the possibility that developed countries have historically addressed and resolved issues like corruption and the rule of law, while these elements remain crucial determinants for the economic growth of developing nations like Afghanistan and Sri Lanka. Empirical findings provide the region's policymakers with essential insights and a guide for implementing their economic growth policies ESG factor‐based and aligned to the United Nations' SDGs. These targets will make the economic growth of the region's countries sustainable.