The Impact of ESG Performance on Innovative Investments by Chinese Companies

Purpose: Against the backdrop of the ongoing promotion of a green economy and highquality development strategies, how enterprises can enhance their innovation capability through sustainable pathways has become a critical issue. Research design, data, and methodology: Although existing studies have explored the relationship between ESG performance and corporate innovation, the underlying mechanisms and heterogeneous effects—especially in the context of China—remain insufficiently examined. This study investigates the impact of ESG performance on corporate innovation investment using a sample of companies with Class A shares listed from 2014 to 2023. Results: The findings show that strong ESG performance significantly enhances corporate innovation investment, and this relationship is partially mediated by a reduction in the cost of debt financing. Moreover, the positive impact of ESG on innovation investment is more pronounced in state-owned enterprises and firms located in non-eastern regions. Conclusions: This study not only uncovers the internal mechanisms through which ESG performance promotes corporate innovation—both directly and indirectly—but also provides theoretical foundations and practical insights for managers, investors, and policymakers aiming to enhance innovation capacity, optimize resource allocation, and achieve sustainable development.