Financial Markets and ESG: How Big Data is Transforming Sustainable Investing in Developing countries

Abstract: This study explores the role of big data adoption and financial market development in driving ESG investments in developing countries, using an instrumental variable (IV) approach to address endogeneity. The results show that big data adoption significantly enhances ESG investing, as data-driven analytics improve sustainability assessments and capital allocation. Financial market development also positively influences ESG investments, but its effect is relatively small. A key finding is that inflation negatively impacts ESG investment, highlighting the importance of macroeconomic stability in fostering sustainable finance. In contrast, GDP per capita and foreign direct investment (FDI) are not significant determinants, suggesting that economic growth alone does not drive sustainability efforts. Overall, this study provides empirical evidence that leveraging big data and financial market improvements can accelerate sustainable investing in emerging economies. Policymakers should focus on technological advancements, financial reforms, and inflation control to strengthen ESG investments and long-term sustainability commitments.