ESG Performance and Capital Investment in BRICS Countries: The Moderating Role of Environmental Innovation
Keywords: ESG performance, Capital investment, Environmental innovation, BRICS countries, Sustainable corporate strategy
Abstract
Purpose – This study aims to investigate the relationship between Environmental, Social, and Governance (ESG) performance and capital investment decisions in non-financial firms across BRICS countries. Specifically, it explores how environmental innovation moderates this relationship, and how the three ESG pillars - environmental, social, and governance- individually affect capital investment behavior.
Methodology – The research utilizes a panel dataset comprising 3,120 firm-year observations covering the period from 2015 to 2024. To ensure robust estimation and address potential endogeneity and unobserved heterogeneity, the study applies both fixed-effects and system Generalized Method of Moments (GMM) regression techniques.
Findings – The empirical results show that ESG performance, as well as its environmental and governance, has a positive and significant with capital investment. These findings suggest that ESG commitments help firms focus on long term investment, make it easier for them to access financing, and build trust with investors, which in turn encourages them to invest more in productive capital assets. The social pillar, however, does not have a significant effect on capital investment.
Originality – This study contributes to the growing ESG–investment literature by disaggregating ESG into its three dimensions and introducing environmental innovation as a moderating variable. It offers novel insights into the interaction between investment efficiency and sustainability oriented practices in emergent market contexts by concentrating on BRICS.
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References
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