Decoding Environmental, Social, and Governance Payoffs in the Energy Sector: The Influence of National Culture and Green Innovation

ABSTRACT This study examines the relationship between environmental, social, and governance (ESG) performance and firm value in the global energy sector, with a focus on the moderating effects of national culture and green innovation. It analyzes 1960 firm‐year observations from publicly traded energy companies in 35 countries from 2014 to 2023. Results show that ESG performance is positively associated with accounting‐based performance, while its impact on market valuation is limited. National culture plays a significant role: individualism enhances the financial benefits of ESG, whereas power distance and uncertainty avoidance reduce them. Green innovation improves operational performance but does not strengthen the ESG–firm value link, likely because of the short‐term costs of implementation and adjustment. The findings underscore the critical role of institutional context and organizational capabilities in driving value through sustainability initiatives in the energy sector. These results hold consistently across ESG measures, subsample analyses, and endogeneity tests.