Does ESG disclosure enhance financial performance in the Pacific Alliance mining sector?

The Pacific Alliance — comprising Peru, Chile, Mexico, and Colombia — ranked as the world’s leading copper mining bloc in 2024 and holds a significant share of critical and commodity minerals such as molybdenum, lithium, zinc, and fluorspar. This study investigates the effects of Bloomberg’s ESG (Environmental, Social, and Governance) disclosure scores — both overall and by individual pillars — on Tobin’s Q as a proxy for financial performance among mining companies in Pacific Alliance countries from 2015 to 2023. The analysis incorporates control variables including commodity share price, firm size, debt, and leverage, using a panel data pooled mean-group estimation approach, except for Colombia, where time-series data from only one firm was available. The findings indicate that Mexican companies align with the stakeholder theory, in which enhanced sustainable performance contributes positively to financial performance. In this context, ESG disclosure serves as a green signal in the stock market, when the share price is non-signal market. In contrast, firms in Peru, Chile, and Colombia appear to adhere more closely to shareholder theory, wherein increased ESG transparency is associated with a decline in Tobin’s Q, although share price emerges as the primary market signal positively influencing Tobin’s Q. All variables were found to contribute to a long-run equilibrium relationship for each company, except for the Colombian case. Based on our findings, we recommend that companies primarily guided by shareholder interests enhance their sustainable environmental, social, and governance (ESG) practices. This involves strengthening ESG disclosure strategies, adopting green technologies to reduce emissions and mitigate the environmental impact of tailings, and integrating ESG considerations into financial planning processes. Furthermore, promoting their listing on ESG-focused stock indices can help support the development of regulated ESG markets.