Vol. 3 No. 1 (2026)

Research Articles

ESG factors and regional economic growth: why green development policies are a key driver of long-run resilience, theory, evidence, and methodological frontiers

Published 2026-01-31

  • Riku Kobayashi
    • ,
  • Mio Tanaka

Riku Kobayashi
Nagoya University image/svg+xml

Mio Tanaka
Hokkaido University image/svg+xml

Abstract

This review synthesizes international evidence on the relationship between environmental, social, and governance (ESG) factors and regional economic growth, with a specific focus on why green development policies, including ecological governance and green finance, can operate as structural drivers of long-run economic resilience. The literature has moved beyond a simple “ESG–performance” correlation toward a multi-channel view in which ESG improvements shape growth paths through productivity dynamics, innovation incentives, capital allocation, risk premia, and adaptive capacity to climate and transition shocks. At the macro and regional scales, recent work finds that ESG performance is more strongly associated with long-run income levels and medium-horizon economic activity than with short-run growth rates, consistent with the time-to-build nature of institutional upgrading and the diffusion of green technologies. At the same time, causal identification remains challenging due to ESG measurement divergence, endogenous policy adoption, and spatial spillovers, motivating a methodological shift toward cointegration, dynamic panels, spatial econometrics, and quasi-experimental designs using policy discontinuities, regulatory shocks, and instrumental variables. This review consolidates key theoretical frameworks (Porter hypothesis, directed technical change, sustainable finance equilibrium, regional resilience) and evaluates empirical advances on green finance instruments (green bonds, green credit) and environmental policy stringency. The synthesis supports a central conclusion: green development policies can enhance long-run resilience by jointly improving the efficiency frontier (innovation offsets), reducing exposure to climate and transition risks, and stabilizing investment expectations, thereby shaping the feasible set of regional development trajectories.

Keywords

ESG, regional economic growth, green development policy, ecological governance, green finance, resilience, environmental regulation, green innovation, climate risk, spatial spillovers

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