There is growing evidence of links between strong ESG systems and business success.

2026 year marks the 20th anniversary of the Principles for Responsible Investment (PRI), launched with United Nations backing two decades ago.

Currently environmental, social, and governance (ESG) related non-financial information – such as greenhouse gas emissions, pollution control, and diversity metrics – is routinely analysed alongside traditional financial data.

A team of researchers from Kyushu University said as companies scale up their ESG commitments, core questions remain: do these efforts create extra value, and how do they affect capital markets?

The researchers found that strengthening ESG disclosure and performance increases both a firm’s intrinsic value and overall market efficiency.

“We focus on firms’ intrinsic value, as it goes beyond short-term metrics like costs and profits to include future opportunities and risks,” explained Xinyu Wang, a PhD student at Kyushu University’s Graduate School of Economics and the paper’s first author. “This offers a more stable measure of long-term value, which aligns with ESG’s vision of sustainable value creation and a resilient global financial system.”

Drawing on a global dataset spanning 2015 to 2022, the team analysed firms across 31 countries on six continents. The sample included companies from manufacturing, raw materials, services, ICT, and other sectors.

The findings confirm that stronger ESG disclosure and performance correspond to higher intrinsic value, with ESG performance having a larger effect than disclosure alone.

“These results align with our theoretical analysis,” continued Wang. “For instance, signalling theory suggests that ESG disclosure reduces information asymmetry and perceived risk. Agency theory indicates that strong ESG performance often reflects more effective internal governance, strengthening trust among key stakeholders, including investors, customers, and employees.”

“Investors care not only about the quantity of information, but also its quality,” added Jun Xie, assistant professor at Kyushu University’s Urban Institute and a co-author of the study. “This highlights the need for companies to communicate their substantive progress honestly, rather than relying on promotional, greenwash-like messaging.”

Beyond increasing intrinsic value, the team said higher ESG practices also bring a firm’s market price closer to its intrinsic value, correcting both overvaluation bubbles and undervaluation. By addressing information gaps that may mislead investors, ESG efforts enable stock prices to reflect firms’ fundamental values more promptly and accurately, thereby enhancing capital market efficiency.

At a global level, however, ESG’s impact is uneven. The effects are more pronounced in advanced economies, while remaining limited in developing ones.

“While creating economic, social, and environmental value, companies are also major consumers of resources and emitters of pollutants. Thus, ensuring a sustainable future requires shifting corporate actions toward sustainable practices,” says Professor Hidemichi Fujii from Kyushu University’s Faculty of Economics, Wang’s academic supervisor. “Our goal is to provide scientific evidence by objectively clarifying the impact of ESG factors. We aim to contribute to policies that transform corporate practices based on these findings.”