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The impact of ESG ratings on corporate energy consumption: a study on companies listed on the Korean stock exchange

  • Journal of Regulation Studies
  • 2022, 31(2), pp.121-160
  • DOI : 10.22954/ksrs.2022.31.2.004
  • Publisher : 한국규제학회
  • Research Area : Social Science > Public Administration
  • Received : December 7, 2022
  • Accepted : December 22, 2022
  • Published : December 30, 2022

Hyunsuk Kim 1

1서울대학교

Accredited

ABSTRACT

This study aims to analyze how ESG ratings can contribute to carbon neutral in the industrial sector, that is, companies, which are the largest consumer of energy consumption accompanied by green gas emissions, as the global warming has been emerged as a global issue. Especially, this study is focusing on the possibility of ESG as an effective solution to environmental problems because ESG has the characteristics of self regulation, unlike general regulation directly involved by the government. Self regulation is easier for companies to secure compliance with regulations than government regulation, and it is possible to acquire regulatory expertise and efficiency in general. As a result of the analysis, it was found that ESG performance related to environmental factors among ESG ratings had a negative effect on energy consumption. In Detail, it was found that a one grade rise in ESG performance has the effect of reducing energy consumption by at least 5.5%. In Korean case, considering that the total energy consumption of the industrial sector as of 2020 is 138 million toe, a share of 5.5% accounts for 7.59 million toe, that is 1.4 times higher than the 5.3 million toe used by the public and other sectors. Furthermore, comparing with the energy efficiency improvement system (EERS) implemented by the government, an annual saving effect of 6 trillion Korean won (equivalent to approx. 4.82 billion US dollars) can be estimated. In short, as ESG, one of the forms of self regulation, has the potential to be an adaptation mechanism that induces eco-friendly behavioral changes in companies, we can found policy implications and lessons in establishing environmental policies for effective energy consumption responding to global climate change.

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