Environmental social governance: a core value to responsible stakeholders and stock market sustainability in the Kingdom of Saudi Arabia

ABSTRACT

Environmental social governance (ESG) is a framework that assists global financial services in developing strategic ways to hedge operating and financial risks and move toward achieving United Nations’ SDGs. Stakeholders consider ESG as a core value while strategizing their investment decisions in the capital market as these factors have the leveraging potential for risk return trade-off, although they are difficult to measure in financial terms. In the volatile capital markets across the globe, the ability of corporate business models to adapt to changes in the economic environment demands the consideration of ESG reporting by the external stakeholders. Thus there is rising demand for ESG reporting and analysis by external stakeholders, including stock exchanges, investors, financial analysts, and corporations, because they have the leveraging potential for risk return trade-off and for sustainable development. The present study analyzes the ESG scores for all the shares listed in the Tadawul All Share Index (TASI) based on selected ranking tools. The analyzed result reveals the current sustainability landscape of businesses in KSA and suggests how responsible investors can uncover value of investment through ESG and how the benefit of this reliable, consistent, and relevant metrics fosters long-term stock market sustainability. The results of the study will enable investors to strategize their capital market-related investment decisions. The result of analysis reveals the current sustainability landscape of businesses in KSA and suggests how responsible investors can uncover value of investment through ESG scores as they consider the material components that affect corporate and investment performance.

KEYWORDS:

• Environmental social governance
• sustainable development goal
• responsible stakeholders
• strategic investment
• stock market sustainability

Acknowledgment

This research was funded by the Deanship of Scientific Research at Princess Nourah Bint Abdulrahman University through the Fast-track Research Funding Program.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Funding

This research was funded by the Deanship of Scientific Research at Princess Nourah Bint Abdulrahman University through the Fast-track Research Funding Program.