Shifting the balance: how ESG transformed corporate debt in emerging and developed markets post-COP21

PurposeWe aimed to examine the influence of ESG performance pre- and post-COP21 on the capital structure of emerging and developed economies.Design/methodology/approachThe analysis is based on 424,927 observations from companies listed in G20 stock exchanges between 2008 and 2023. Panel data regression models are employed to evaluate the impact of ESG performance on total, short-term and long-term debt, with interactions exploring differences between emerging and developed markets and the effects of COP21.FindingsOur results reveal that ESG performance significantly influences corporate debt structures, particularly after COP21. Firms with strong ESG profiles experienced improved access to long-term financing, while short-term financing benefits were less pronounced. Companies adopting ESG practices in emerging markets mitigate structural financing challenges, gaining better access to long-term debt. Additionally, aligning ESG strategies with global sustainability goals post-COP21 enhanced debt access, emphasizing the growing role of ESG in corporate financing.Research limitations/implicationsThe findings are based on G20 stock exchange data and may not generalize to non-G20 economies. Future research could expand the geographic scope and examine industry-specific ESG impacts.Practical implicationsThe study highlights the importance of integrating ESG considerations into financial decision-making to enhance corporate debt access, particularly in the context of global sustainability goals.Originality/valueThis study contributes to the literature by analyzing ESG performance’s impact on corporate capital structures across different economic contexts and regulatory environments. It underscores the importance of sustainability practices in financial strategy, particularly in emerging markets, where ESG adoption helps overcome structural barriers.