Currently, a growing number of investors are taking environmental, social, and governance (ESG) factors into account when making investment decisions. Against this background, this paper aims to empirically examine the effect of ESG performance on sovereign funding costs with a focus on the Asia-pacific region. Based on system GMM and OLS estimation, we discover that better ESG performance is associated with lower funding costs. Regarding the effects of each component of ESG, we note that both environmental and governance factors are found significant among the Asia-pacific region, while governance factor is more pronounced among OECD countries.
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