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ABSTRACT In emerging economies, businesses face mounting pressure to enhance their environmental, social, and governance (ESG) practices while boosting operational efficiency. This study investigates the mediating role of environmental R&D investment (END) in the relationship between ESG performance and firm efficiency. Using the fixed effects and system GMM approaches, the analysis covers data from BRICS firms between 2010 and 2022. To ensure robustness, panel quantile regression (PQR) is employed to validate results across various quantiles of firm efficiency distribution. The findings indicate that ESG performance positively influences firm efficiency, with END acting as a crucial mediator in this relationship. Specifically, firms with higher ESG scores are more inclined to invest in END, which subsequently drives improvements in efficiency through innovations in sustainable practices and technologies. The study suggests that policymakers should implement financial mechanisms, incentives, and regulations to foster investments in environmental R&D, thereby supporting ESG practices. This research adds to the existing body of literature by emphasizing the unique function of environmental R&D spending as a mediator between ESG performance and enterprise efficiency.
Farooq et al. (Mon,) studied this question.