Decarbonizing the Building Sector: The Integrated Role of Environmental, Social, and Governance Indicators

Climate change mitigation for the built environment has become a subject of greatest urgency, as buildings account for nearly 40% of total energy consumption and nearly one-third of total CO₂ emissions. While environmental, social, and governance (ESG) indicators are increasingly used to monitor sustainability performance, their collective role in impacting building-related emissions is yet largely under-investigated. The current research closes that gap through an examination of the ESG dimension–CO₂ emissions intersection of 180 nations from 2000 to 2022, in the hope of illuminating how environmental, social, and governance elements interact to facilitate decarbonization. The research is guided by a multi-method design, including econometric examination, cluster modeling, and machine learning techniques, which provide causal evidence and predictive analysis, respectively. The findings reveal that the deployment of renewable energy significantly reduces emissions, while per capita energy use and PM_2.5 air pollution exacerbate this effect. The social indicators show mixed results: learning, women’s parliamentary representation, and women’s workforce representation reduce emissions, while food production and growth among the lowest-income individuals demonstrate higher emissions. Governance demonstrates mixed results as well, with good regulation reducing emissions under specific conditions yet primarily supporting high-income countries with superior infrastructure. The examination of clusters reveals that ESG-balanced performance is retained by countries in the low-emission clusters, whereas decentralized ESG pillars are associated with higher emissions. Machine learning confirms the existence of non-linear effects and identifies PM_2.5 exposure and renewable energy deployment as the strongest predictors of the relationship. In summary, the findings suggest that successful policies for decarbonizing the built environment are constructed upon the consistency of environmental, social, and governance plans, rather than single steps.