Morocco's green shield: ESG stock performance under global climate, economic, geopolitical and oil uncertainties

Abstract

This study employs the Nonlinear Autoregressive Distributed Lag (NARDL) model to explore the dynamics of the Moroccan Environmental, Social, and Governance stock market (MASI ESG), considering the influence of global factors, including oil price (Brent), Global Economic Policy Uncertainty (GEPU), geopolitical risk (GPR), and climate policy uncertainty (CPU).

A significant positive relationship between MASI ESG and Brent is identified, attributed to Morocco's energy import reliance. Increasing oil prices incentivize sustainable practices, thereby enhancing ESG performance. Conversely, GEPU negatively impacts MASI ESG in the long term, discouraging investors during economic uncertainties, posing a threat to ESG's sustained viability. The study unveils a nuanced relationship between GPR and ESG performance, where geopolitical risk exhibits a dual nature, presenting challenges during long-term turmoil but potentially boosting confidence amid short-term fluctuations.

While initially insignificant, CPU demonstrates a sustained positive relationship with MASI ESG over time, emphasizing the growing significance of climate-conscious strategies for long-term ESG performance. We evince the potential of the Moroccan ESG market to contribute to a sustainable future by attracting responsible investments and fostering sustainable business practices. By overcoming challenges and embracing innovation, the Moroccan ESG market can emerge as a model for other developing countries striving for sustainable economic growth.