Sustainable investment conditions and firm performance in the Middle East and North Africa: a holistic approach

ABSTRACT

We analyze the effect of sustainable investment conditions on firm performance in the Middle East and North African countries. We measure sustainable investment conditions by the extent of market preparedness for sustainable investment and the percent of total assets under management qualifying for sustainable investment with and without Shariah-compliance characteristics. We use both accounting and market-based performance measures to capture alternative influences due to sustainable investment conditions. We control for firm-specific characteristics and country-level sustainability-related, economic, and institutional factors. We find that higher market preparedness is positively associated with all performance measures, whilst sustainable investment volumes are negatively associated with accounting measures of firm performance but positively associated with market performance. The effects remain broadly robust to various sensitivity tests and endogeneity analyses. Country-level institutions moderate the sustainability conditions effect. Our dominance analysis identifies the factors that are key in improving firm performance, providing clear directions for effective policy intervention.

KEYWORDS:

• Sustainable investment conditions
• ESG
• corporate governance
• firm performance
• institutions
• MENA

JEL CLASSIFICATION:

• Q01
• G34
• L25
• N25

Disclosure statement

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

Notes

1 https://www.sri-connect.com/index.php?option=com_content&view=article&id=12&Itemid=70

2 https://www.sustainalytics.com/investor-solutions/index-research-services/jantzi-social-index

3 https://www.spglobal.com/esg/performance/indices/djsi-index-family

4 https://www.spglobal.com/spdji/en/indices/equity/sp-tsx-renewable-energy-and-clean-technology-index/

5 https://www.ftserussell.com/products/indices/ftse4good

6 https://epi.yale.edu/

7 https://www.unglobalcompact.org/

8 https://www.transparency.org/en/cpi/2020/index/nzl

9 https://www.rotman.utoronto.ca/FacultyAndResearch/ResearchCentres/JohnstonCentre/BoardRatings

10 https://www.greenbiz.com/article/firms-esg-scores-improve-countries-macroeconomic-growth-report-finds

11 https://www.sustainablefitch.com/insights/role-of-sustainable-finance-debt-is-growing-for-insurers/#back-to-top