Moving Toward Sustainable Finance: Leveraging Environmental, Social, Governance (ESG) Performance and Risk Management to Derive Corporate Financing Efficiency

Abstract

Sustainable finance has gained increasing relevance and interest primarily due to its importance for understanding how credit access and macroeconomic conditions affect the allocation of financial resources across countries. This study assesses credit access and inflation, on the one hand, and financial resource allocation, on the other, employing panel data for 19 selected countries for the period of 2010 to 2024, drawn from the World Development Indicators (WDI). The analysis for efficiency determinants in the allocation of financial resources is conducted using both Ordinary Least Squares (OLS) and Fixed Effects regression models. The results show a significant and highly positive impact of credit access on financial resource allocation, indicating that the higher the credit availability, the more efficient the allocation of funds to the productive sectors. Conversely, the negative sign on inflation is statistically insignificant, implying that price volatility does not strongly impact the outcomes of allocation financing. These results speak to policymakers about strengthening credit systems and improving macroeconomic stability for enhancing sustainable financial allocation and economic growth.