Beyond Governance: Exploring the Role of ESG Integration and Political Stability in Attracting Sustainable FDI in Emerging Markets

Authors

  • Farooq Dr. Muhammad Umer Corresponding, Professor, Department of Management Sciences, Baluchistan University of Information Technology, Engineering and Management Sciences, muhammad.umar1@buitms.edu.pk mumerfarooq2006@gmail.com Author
  • Lodhi Dr. Abdul Salam Professor, Baluchistan University of Information Technology, Engineering and Management Sciences, Quetta, Baluchistan, salam@buitms.edu.pk Author
  • qbal Dr. Khurshed Associate Professor, Baluchistan University of Information Technology, Engineering and Management Sciences, Quetta, Baluchistan, khurshed.iqbal@buitms.edu.pk Author
  • Kasi Ameer Muhammad Lecturer, Baluchistan University of Information Technology, Engineering and Management Sciences, Quetta, Baluchistan, ameer.muhammad@buitms.edu.pk Author
  • Masood Dr. Amjad Assistant Professor, Bahria Business School, Bahria University, Islamabad, Pakistan Author
  • Khan6 Noor Ahmad Lecturer, Zhob Campus, Baluchistan University of Information Technology, Engineering and Management Sciences, Quetta, Baluchistan, noor.ahmed@buitms.edu.pk Author
  • Nadeem Dr. Abid Hussain Assistant Professor, Management Sciences, Khawaja Fareed University of Engineering and Information Technology. Rahim Yar Khan, abid.hussain@kfueit.edu.pk Author
  • Afzal Muhammad Imran Visiting Lecturer, Department of Management Sciences, University of Okara, mimranbinafzal@gmail.com Author

Keywords:

Sustainable FDI, ESG integration, political stability, emerging markets, institutional quality, responsible investment, SDGs

Abstract

As sustainability becomes a defining criterion in global capital flows, emerging markets are under growing pressure to attract foreign direct investment (FDI) that is aligned with Environmental, Social, and Governance (ESG) principles. While governance quality has long been recognized as a foundational factor influencing investment decisions, the combined role of ESG integration and political stability remains underexplored. This study investigates how ESG adoption and political stability contribute to attracting sustainable FDI in emerging economies. Using a panel dataset of 30 emerging markets from 2010 to 2023, we employ Fixed Effects (FE) and System Generalized Method of Moments (GMM) estimations to address endogeneity and unobserved heterogeneity. Our findings reveal that ESG integration significantly enhances sustainable FDI inflows, and this effect is further amplified in politically stable environments. Governance quality, while still important, plays a complementary role. These results underscore the need for holistic investment policies that combine ESG commitments with institutional stability to foster long-term, responsible investment. The study offers actionable insights for policymakers, development agencies, and institutional investors seeking to align capital with the Sustainable Development Goals (SDGs).

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Published

2023-03-31

Issue

Vol. 9 No. 1 (2023)

Section

Articles