Author(s): Agbeyinka Yinka Ibrahim
The integration of Environmental, Social, and Governance (ESG) considerations into financial markets is reshaping the pricing of risk, particularly in emerging energy markets where sustainable finance instruments such as green bonds are rapidly expanding. This study investigates how ESG performance influences green bond yield spreads and firm valuations among energy firms in emerging markets. Using a comprehensive panel dataset of 312 firm-year observations drawn from Bloomberg and Refinitiv, the study applies an event study methodology combined with panel regression and ESG scoring analysis to explore the dynamics of ESG risk pricing. The results reveal that higher ESG performance significantly reduces green bond yield spreads, with environmental factors exerting the most pronounced effect. Moreover, firm size, leverage, profitability, and governance quality are found to be important moderators of these relationships. The sensitivity analysis confirms the robustness of the results, particularly emphasizing the role of environmental and governance dimensions in sustainable bond pricing. The study recommends that policymakers harmonize ESG disclosure frameworks, strengthen governance reforms, and foster inclusive green bond markets to enhance market efficiency and support the energy transition. It also highlights the need for future research to expand the scope of ESG risk pricing studies across sectors and regions to further inform sustainable finance policy development.