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Does materiality matter in ESG investing?

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  • Ben Amor, Salma
  • Kooli, Maher

Abstract

This study contributes to the environmental, social, and governance (ESG) literature by addressing the role of materiality in financial performance, an area that has received relatively little empirical attention in the Canadian context. Using panel data from all Canadian S&P/TSX Composite Index firms from 2010 to 2022, our findings suggest that not all ESG issues are of equal significance, and materiality is a critical determinant. Specifically, we demonstrate a positive and significant association between a firm’s ESG materiality score and financial performance, whereas immaterial ESG issues exhibit either no significant impact or a negative relationship with firm performance. Furthermore, using a quantile regression framework, we highlight the pivotal role of disclosing material ESG issues in explaining variations in profitability and firm value across different performance levels.

Suggested Citation

  • Ben Amor, Salma & Kooli, Maher, 2025. "Does materiality matter in ESG investing?," Research in International Business and Finance, Elsevier, vol. 79(C).
    • Handle: RePEc:eee:riibaf:v:79:y:2025:i:c:s0275531925003617
    DOI: 10.1016/j.ribaf.2025.103105
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    Keywords

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    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • G3 - Financial Economics - - Corporate Finance and Governance
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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