IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v18y2026i7p3533-d1913730.html

The Moderating Effect of Climate Risk on the Relationship Between ESG Performance and Green Innovation: Evidence from an Emerging Market

Author

Listed:
  • Ines Chaabouni

    (College of Business, Imam Mohammad Ibn Saud Islamic University (IMSIU), P.O. Box 5701, Riyadh 11432, Saudi Arabia)

  • Sameh Hachicha

    (College of Business, Imam Mohammad Ibn Saud Islamic University (IMSIU), P.O. Box 5701, Riyadh 11432, Saudi Arabia)

  • Habib Jouber

    (College of Business, Imam Mohammad Ibn Saud Islamic University (IMSIU), P.O. Box 5701, Riyadh 11432, Saudi Arabia)

Abstract

Environmental, social, and governance (ESG) engagement has been identified as a strategic priority for firms. However, its impact on green innovation (GIN) remains contested. Indeed, the propensity for climate risk to shape the effectiveness of ESG-driven GIN is underexplored. This study investigates how ESG performance (ESGPerf) influences GIN and examines the moderating effect of climate physical risk within the Saudi setting over 2002–2024. Results from fixed-effects and two-stage least squares (2SLS) regressions applied to 460 firm-year observations show that ESGPerf promotes GIN, while climate risk independently stimulates innovation and dampens ESGPerf’s positive effect on GIN. These findings suggest that environmental uncertainty shifts firms’ resource allocation between long-term innovation and short-term adaptation, demonstrating that the strategic value of ESG investments is contingent on risk contexts and underscores ESG commitment as a potential strategic capability rather than mere symbolic compliance. These findings are insensitive to rigorous robustness checks, including alternative variables’ measures and estimation techniques.

Suggested Citation

  • Ines Chaabouni & Sameh Hachicha & Habib Jouber, 2026. "The Moderating Effect of Climate Risk on the Relationship Between ESG Performance and Green Innovation: Evidence from an Emerging Market," Sustainability, MDPI, vol. 18(7), pages 1-24, April.
    • Handle: RePEc:gam:jsusta:v:18:y:2026:i:7:p:3533-:d:1913730
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/18/7/3533/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2071-1050/18/7/3533/
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jsusta:v:18:y:2026:i:7:p:3533-:d:1913730. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.