Moving towards sustainable development: lessons from global study about the role of foreign institutional investors in environmental performance

Abstract

This paper examines the effect of Foreign institutional investors on Environmental performance around the world. Using a sample of 19,666 firm-year observations from28 global countries over 17 years (from 2002 to 2018), we find that Foreign institutional investors positively influence Environmental performance. Additionally, our analysis shows that the relationship between Foreign institutional investors and Environmental performance is weaker under the Common law system. Moreover, higher Economic freedom also weakens the beneficial impact of Foreign institutional investors on Environmental performance. We also document that firms with higher Performance and growth opportunities have less pronounced positive environmental influence from Foreign institutional investors. Overall, our study emphasizes the advantages of Foreign institutional investors in terms of enhancing Environmental performance which contributes to sustainable development. Our research also contributes to goal 12 and goal 13 of the 17 Sustainable Development Goals because the sustainable development is supported through the increasing Environmental performance under the positive influence of Foreign institutional investors which stimulates the responsible consumption and production and climate action as well.