An Analysis on ESG Index on Investor Invesment of Firms & Stock Performance: Theoretical Perspective in Exploration of Overlap of ESG and Sustainable Development

Several organizations and people over the last couple of years have recognized ESG (Environmental, Social, and Governance) and SD (Sustainable Development) as important concepts to be incorporated into one or a number of their day-to-day uses. Nonetheless, the overlap between ESG and SD is still under-researched, especially on a theoretical level. We intend to discuss this gap in this paper because of the theoretical background over the intersection of ESG and SD. In this study, we use the stakeholder theory and institutional theory as well as social constructivism to explore the intersection of ESG and SD. The results indicate SDG data is embedded in ESG and, therefore, the success of ESG may be dependent on effective management. It also reveals that ESG aspects can play a significant role in sustainable development as they may mitigate environmental degradation, enhance social equity and improve corporate governance. Stakeholder theory suggests that ESG can be viewed as a tool for balancing the conflicting interests of different constituencies, which is conducive to sustainable development. According to institutional theory, the relationship between ESG and SD is contextualised within institutional structures and norms. Social constructivism focuses on how social norms and values shape our perceptions of ESG and SD. The implications of the findings are critical for policymakers, business leaders and civil society organizations. They recommend that ESG factors be incorporated into decision-making across the board, from policies to corporate governance. In addition, the study points to the fact that more cooperation and coordination between stakeholders will be needed in order to meet sustainable development objectives. This study attempts to present a theoretical framework for understanding the overlap between ESG and SD, highlighting the importance of incorporating ESG considerations into sustainable development strategies and it contributes also helps for the development of a more comprehensive understanding of the complex relationships between ESG, SD, and sustainable development in society.