ESG, RISK AND SUSTAINABILITY CONVERGENCE IN EMERGING EQUITY MARKET: EVIDENCE FROM BIST

Abstract

This research explores the impact of Environmental, Social, and Governance (ESG) on the stock market of Borsa Istanbul, including the influence of ESG on stock returns, association with firm size, and convergence. The study employs time-varying ESG scores from S&P Global for large-listed Turkish firms from 2018 to 2024, stock returns, and firm-specific information, using panel, cross-sectional and portfolio approaches. Results show that ESG scores do not relate to stock returns, with the estimated effect being negative, insignificant and unstable. However, ESG performance is positively associated with firm size, suggesting that larger firms, which have more resources and institutional stability, are more likely to pursue and disclose ESG practices. Also, firms with lower starting ESG scores show larger increases in ESG scores, confirming a convergence effect in ESG practices. In conclusion, the findings indicate that although ESG is associated with firm structure and convergence in Borsa Istanbul, it is not incorporated into stock prices.