ABSTRACT How do firms' innovation capabilities shape the relationship between artificial intelligence (AI), financial innovation and environmental, social and governance (ESG) performance nexus? This study investigates this underexplored nexus using survey data from 267 Chinese firms, analysed with partial least squares–SEM and PROCESS models. Our results show that AI and financial innovation positively influence ESG performance, with green innovation and information transparency serving as key mediators. Sectoral and regional patterns suggest that AI‐driven green innovation is particularly impactful in manufacturing, whereas financial innovation's effect on ESG performance is pronounced in financial institutions through enhanced transparency. Regional differences indicate that firms in Guangzhou benefit more from AI and financial innovation, while financial innovation's influence is stronger in Jiangsu. These findings highlight the strategic importance of integrating AI and financial innovation into their ESG initiatives, highlighting innovations and transparency to advance sustainable outcomes in emerging economies.
Shen et al. (Fri,) studied this question.