ABSTRACT A fundamental challenge for businesses globally is how to allocate limited resources between sustainability disclosure (“talk”) and practice (“walk”). Existing research either relies on aggregated ESG scores or examines disclosure or practice in isolation, failing to capture their strategic interplay and ignoring dimension‐specific differences, which creates ambiguity for practice. This study fills this gap by investigating the dimension‐specific interaction between ESG disclosure and practice (conceptualized as ESG strategic positioning) and its impact on financial performance. Empirically, we first employ an ANOVA to identify significant performance differences across ESG strategic positions. We then apply a fixed‐effects model, controlling for firm and time heterogeneity, to robustly estimate the causal effect. Results show financial returns depend on where (E/S/G) and how (“talking” vs. “walking”) firms invest. Specifically, we find that firms benefit most “talking” on environmental issues; prioritize “talking” while being cautious with “walking” on social issues; and gain value from “walking” on governance issues. These findings offer a universal economic insight: not all ESG investments are equal. At the same time, this study provides managers and investors with a strategic lens to prioritize sustainability investments for maximum financial return.
Yang et al. (Mon,) studied this question.