ESG Performance, Environmental Innovation, and Stock Performance: Evidence from a First-Stage Moderated Mediation Framework

The relationship between environmental, social, and governance (ESG) performance and stock market outcomes has generated sustained scholarly attention; however, the mechanisms and boundary conditions through which ESG creates shareholder value remain inadequately understood. This study examines whether ESG performance influences stock performance through the mediating role of environmental innovation and whether this mediation pathway is conditioned by industry sensitivity. Employing a first-stage moderated mediation framework, the analysis draws on panel data extracted from Refinitiv Workspace and uses feasible generalized least squares estimation to account for heteroskedasticity and serial correlation. Mediation is formally tested using the Sobel, Aroian, and Goodman procedures, and the two dimensions of stock performance are examined simultaneously to capture both risk-adjusted and fundamental aspects of market value. The findings confirm that ESG performance positively and significantly predicts both stock performance dimensions and that environmental innovation partially mediates these relationships. Moderation analysis reveals that industry sensitivity does not significantly amplify the ESG–innovation pathway, a result that has important implications for how context-conditionality is theorized in the ESG literature. This study advances the understanding of the specific operational channels through which ESG commitments translate into capital market outcomes and provides actionable guidance for investors, corporate strategists, and sustainability policymakers.