Exploring the Effects of Corporate Engagement and Compliance in ESG Investment on Business Performance

Abstract

This study examines the effects of corporate engagement and compliance in environmental, social, and governance (ESG) investment on both financial performance and human resource performance, using a sample of 178 publicly listed companies in Taiwan. Because no existing scales for the degree of engagement and degree of compliance were found in the literature, we develop distinct scales for these constructs. Additionally, corporate performance is divided into financial and human resource performance, with corresponding scales constructed for each.

The empirical results indicate that the degree of engagement positively influences both financial and human resource performance and that the degree of compliance is positively associated with human resource performance but not with performance.

The effect of the degree of engagement on financial and human resource performance exceeds that of the degree of compliance. This finding suggests that companies with more active ESG investment tend to achieve superior overall business performance, with the effects of active ESG investment surpassing those of mere regulatory compliance. In other words, firms that actively seek to lead in production, marketing, human resources, research and development, and finance relative to their primary competitors see stronger improvements in performance than those that passively adhere to regulatory standards.