Do Sovereign ESG Indicators Improve Portfolio Resilience in Emerging and Developing Markets? Evidence from Open Financial and ESG Data

Environmental, social, and governance (ESG) information is increasingly used in portfolio construction, risk monitoring, and sustainable investment mandates. Yet the empirical role of ESG in emerging and developing markets remains contested because many studies rely on proprietary firm-level ratings, limited samples, or non-reproducible data sources. This article develops an open-data framework for testing whether sovereign ESG indicators are associated with equity-market resilience in emerging and developing economies. Using World Bank Sovereign ESG, Worldwide Governance Indicators, World Development Indicators, Global Financial Development indicators, FRED global risk controls, and Fama-French emerging-market factor files, the study constructs a country-year panel covering the period 1996-2024. The research design links lagged sovereign ESG indicators to annual equity-index returns, stock-market volatility, and crisis-period performance. The empirical strategy combines descriptive portfolio-style comparisons, fixed-effects country-year regressions, and crisis interaction models for 2008-2009, 2020, and 2022. Descriptive evidence suggests that governance indicators are more consistently related to stock-market volatility than to annual return levels, supporting a resilience interpretation rather than a simple ESG-alpha interpretation. The study contributes to sustainable finance research by offering a transparent, reproducible approach to sovereign ESG analysis that can be extended by investors, researchers, and policy analysts working with open financial data.