Commonality in Sustainability

We examine sustainability commonality, the alignment of firm-level ESG practices with country, industry, regional, and global sustainability factors, using data from 3,010 firms across 36 markets. ESG alignment is strongest within countries, particularly in the environmental and social pillars. The 2015 Paris Agreement served as a global shock that increased ESG commonality among resource-constrained firms. Independently, we find that mimetic behavior, firms imitating peers within industries, also contributes to convergence in ESG practices. Further, we examine commonality across markets finding evidence of a distinct, global and regional component. We show that sustainability commonality drives return comovement and is linked to firm performance, highlighting its role as a systemic driver of financial and corporate outcomes. Our findings highlight the systemic nature of ESG and its relevance for investors and policymakers.