ESRI Discussion Paper Series No.390 ESG as a Tool for Advancing SDGs from High-Income to Low-Income Countries: Evidence from Matched Data of Japanese Central Headquarters and Overseas Subsidiaries

　This study investigates the impacts of the “Environmental,” “Social,” and “Governance” (ESG) stances of multinational corporations (MNCs) in high-income countries on the performance of their overseas subsidiaries situated in low-income countries. This inquiry is particularly relevant in the context of the global push to achieve the Sustainable Development Goals by 2030. To address this question, we construct unique matched data by combining the ESG scores of Japanese-listed companies with financial data from their central headquarters (CHQs) in Japan and overseas subsidiaries in low-income economies. The estimation results reveal that improvements in the ESG scores of CHQs do not positively impact the employment and wages of their overseas subsidiaries. However, they have a significantly positive effect on labor productivity. Specifically, improving the “Community” score, which is associated with the level of social capital, demonstrates an economically significant positive impact.