ESG Reputation Risk, Corporate Risk-Taking, and Climate Impact in Southeast Asia

Abstract

The primary objective of this study is to examine the influence of corporate risk-taking (CRT) and the climate risk index (CRI) on the Reputation Risk Index (RRI). The analysis employs panel data regression using 597 firmyear observations of non-financial firms across five Southeast Asian countries from 2021 to 2023. Additional robust tests and alternative measurements are used to ensure the consistency and reliability of the findings. The results reveal that CRT has a significant positive effect on RRI, indicating that higher levels of corporate risk-taking are associated with increased ESG-related reputation risks driven by heightened stakeholder scrutiny. Furthermore, the findings show that CRI does not exert a significant influence on RRI, suggesting that climate-related vulnerabilities may affect reputation only through indirect channels. These results reflect broader phenomena wherein firms engaging in aggressive financial or strategic risk behaviors face greater reputational exposure than those primarily confronted with environmental risks. The evidence highlights the distinct pathways through which financial and environmental dimensions translate into corporate reputation outcomes. Theoretical and practical implications encourage firms to strengthen governance mechanisms that balance risk-taking with stakeholder expectations to reduce ESG reputation risks. Policymakers are advised to integrate ESG-aligned risk management standards to enhance corporate accountability across emerging markets. The novelty of this research lies in the introduction of the ESG Reputation Risk Index as a new metric and its application within the Southeast Asian context, which remains underexplored in prior studies.