Modeling the link between environmental, social, and governance disclosures and scores: the case of publicly traded companies in the Borsa Istanbul Sustainability Index

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Kartal M. T., KILIÇ DEPREN S., PATA U. K., Taşkın Yeşilova F. D., Şavlı T.

Financial Innovation, cilt.10, sa.1, 2024 (SSCI) identifier

  • Yayın Türü: Makale / Tam Makale
  • Cilt numarası: 10 Sayı: 1
  • Basım Tarihi: 2024
  • Doi Numarası: 10.1186/s40854-024-00619-1
  • Dergi Adı: Financial Innovation
  • Derginin Tarandığı İndeksler: Social Sciences Citation Index (SSCI), Scopus
  • Anahtar Kelimeler: Artificial neural network, Borsa Istanbul Sustainability Index, C45, ESG disclosures, ESG scores, G34, G38, M48, New ESG reporting scheme, O16, Türkiye
  • Hatay Mustafa Kemal Üniversitesi Adresli: Evet

Özet

This study constructs a proposed model to investigate the link between environmental, social, and governance (ESG) disclosures and ESG scores for publicly traded companies in the Borsa Istanbul Sustainability (XUSRD) index. In this context, this study considers 66 companies, examining recently structured ESG disclosures for 2022 that were published for the first time as novel data and applying a multilayer perceptron (MLP) artificial neural network algorithm. The relevant results are fourfold. (1) The MLP algorithm has explanatory power (i.e., R2) of 79% in estimating companies’ ESG scores. (2) Common, environment, social, and governance pillars have respective weights of 21.04%, 44.87%, 30.34%, and 3.74% in total ESG scores. (3) The absolute and relative significance of each ESG reporting principle for companies’ ESG scores varies. (4) According to absolute and relative significance, the most effective ESG principle is the common principle, followed by social and environmental principles, whereas governance principles have less significance. Overall, the results demonstrate that applying a linear approach to complete deficient ESG disclosures is inefficient for increasing companies’ ESG scores; instead, companies should focus on the ESG principles that have the highest relative significance. The findings of this study contribute to the literature by defining the most significant ESG principles for stimulating the ESG scores of companies in the XUSRD index.