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    Combining good business and good development: Evidence from IFC Operations

    Desai, Raj M.; Kharas, Homi; Amin, Magdi | May 2017
    Abstract
    Most studies of the links between corporate environmental and socially sustainable actions find a positive link with financial performance. Most of these studies, however, have analyzed firms only in developed countries, and their identifying assumptions do not typically allow causal inferences. We are able to study firm performance in developing countries by using data from investments made by the International Finance Corporation (IFC) across over 1,000 projects between 2005 and 2014 in close to 100 middle- and low-income countries. The IFC provides information on the financial performance of their investments as well as ratings of environmental, social, and governance (ESG) outcomes. It is well established that such data may be affected by random and systematic error and that there is unavoidable endogeneity between ESG and financial performance since profitable firms can afford to behave more sustainably. Using an instrumental variables approach, we find that the relationship between a firm’s sustainability behavior and profits disappears. However, there is some evidence that both sustainability and profits can jointly impact broader private sector development. Our results have implications for how best to blend public and private finance in the cause of sustainable development.
    Citation
    Desai, Raj M.; Kharas, Homi; Amin, Magdi. 2017. Combining good business and good development: Evidence from IFC Operations. © Brookings India. http://hdl.handle.net/11540/7125.
    Keywords
    International Financial Market
    Multilateral Financial Institutions
    Economic Recession
    Market
    Crisis
    Economic indicators
    Growth models
    Gross domestic product
    Macroeconomics
    Economic forecast
    Financial Stability
    Financial Management System
    Financial Restructuring
    Capital Market Development
    Market Development
    Economics
    Erosion
    International Economics
    Macroeconomic
    Macroeconomic Analysis
    Performance Evaluation
    Impact Evaluation
    Business recessions
    Multilateral development banks
    Regulatory reform
    Capital
    Exports
    Economic development projects
    Economic policy
    Economic forecasting
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    Citable URI
    http://hdl.handle.net/11540/7125
    Metadata
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    combining-good-business-development.pdf (1.367Mb)
    Author
    Desai, Raj M.
    Kharas, Homi
    Amin, Magdi
    Theme
    Finance
    Economics
     
    Copyright 2016-2021 Asian Development Bank Institute, except as explicitly marked otherwise
    Copyright 2016-2021 Asian Development Bank Institute, except as explicitly marked otherwise