Navigating ESG challenges in ICT: Risks and rewards across the pandemic landscape

Abstract

This study explores the impact of ESG risks on the financial and investment performance of 115 Fortune Global ICT firms from 2017 to 2021, a sector vital to global GDP growth. Using Ridge Regression and Instrumental Variables Generalized Method of Moments, it examines the relationship between ESG risks and annual revenue while controlling for firm size. Findings reveal that larger ICT firms exhibit lower environmental (E) risks but higher governance (G) risks, with lower governance risks strongly linked to superior financial performance, positioning governance as the most critical ESG factor. Investment portfolios constructed based on ESG risk levels consistently outperformed benchmarks during periods of economic instability, such as the COVID-19 pandemic, demonstrating the resilience of firms with effective ESG management. From an investor's perspective, tailored and valid ESG disclosures are essential for informed decision-making. This study extends the signalling governance theory by identifying low ESG risk—particularly governance risk—as a direct signal of corporate resilience and sustainability. It underscores the strategic importance of governance improvements and customised ESG frameworks in enhancing financial outcomes, investment performance, and stakeholder trust. It offers actionable insights for ICT firms navigating increasingly uncertain global markets.