National FDI and Corporate ESG: Redefine Business Models in Emerging G20 Economies

This study examines the paradoxical role of both inward and outward foreign direct investment (FDI) in shaping corporate Environmental, Social and Governance (ESG) performance. We analyse panel data from 2014 to 2023, comprising 6511 firm-year observations from the G20 emerging economies. We analyse using fixed effects (FE), FE-robust, Driscoll–Kraay, and high-dimensional fixed effects (HDFE), as well as dynamic threshold regressions. Our results show a U-shaped association between inward FDI and corporate ESG performance. At low levels, inward FDI is associated with weaker ESG performance, while beyond the threshold, the marginal effect becomes positive. Conversely, outward FDI follows an inverted U-shaped relationship with ESG, implying that ESG gains from internationalisation up to a threshold, followed by diminishing or negative marginal returns. Results from the panel threshold regression support regime shifts in the FDI–ESG relationship and identify threshold values for inward (1.941%) and outward FDI (1.027%). The Paris Agreement of 2016 marks the importance of FDI in attracting capital for international expansion. The findings contribute to global business and sustainable finance research by documenting that globalisation affects ESG in nonlinear ways that depend on national-level FDI intensity and the institutional environment. Policy implications highlight that attracting "good" FDI for sustainability requires institutional capacity and complementary governance reforms; managerial implications emphasise sequencing internationalisation with ESG capability-building.