This study examines how firms’ strategic adjustments can either enhance or undermine the financial benefits of environmental, social, and governance (ESG) ambitions, using a sample of 119 A-share energy companies in China. The findings indicate that: (i) strong ESG performance is positively correlated with improved financial outcomes, including higher returns on assets, revenue growth, and profitability. However, rapid or poorly managed strategic changes can reduce these benefits, disrupting the long-term financial stability that ESG efforts promote; (ii) traditional energy companies (e.g. petroleum and coal) benefit more from ESG improvements than new energy firms, but they are more negatively impacted by strategic changes due to organizational inertia and higher restructuring costs, making it harder to balance ESG initiatives with strategic shifts; (iii) the study highlights the impact of China's 2020 carbon neutrality policy, with firms that gradually aligned their strategies with ESG goals seeing stronger financial returns post-2020, while those making aggressive strategic changes experienced a greater decline in ESG-related financial benefits; (iv) privately owned enterprises are more effective at leveraging ESG for financial gain than state-owned enterprises, due to their innovation and crisis awareness, which facilitates more effective strategic adaptation and stronger ESG performance. These findings offer valuable insights for energy firms seeking to balance ESG objectives with financial performance in an increasingly complex and dynamic business environment.
ChenSSongYGaoP. Environmental, social, and governance (ESG) performance and financial outcomes: analyzing the impact of ESG on financial performance. J Environ Manag2023; 345: 118829.
2.
Delgado-CeballosJOrtiz-De-MandojanaNAntolín-LópezR,et al.Connecting the sustainable development goals to firm-level sustainability and ESG factors: the need for double materiality. In: BRQ Business research quarterly. Sage Publications, Sage UK: London, England, 2023, Vol. 26, pp. 2–10.
3.
WangQRenFLiR. Geopolitics and energy security: a comprehensive exploration of evolution, collaborations, and future directions. Human Soc Sci Commun2024; 11: 1–26.
4.
Al-SaidiM. White knight or partner of choice? The Ukraine war and the role of the Middle East in the energy security of Europe. Energy Strateg Rev2023; 49: 101116.
5.
WangQLiYLiR. Integrating artificial intelligence in energy transition: a comprehensive review. Energy Strateg Rev2025; 57: 101600.
6.
LiRLiLWangQ. The impact of energy efficiency on carbon emissions: evidence from the transportation sector in Chinese 30 provinces. Sustain Cities Soc2022; 82: 103880.
7.
AbbasSSahaTSinhaA. Price response of top-five renewable energy firms to Russia-Ukraine conflict: an advanced quantile analysis to achieve net-zero in United States of America. J Clean Prod2024; 442: 141153.
8.
HassaneinABani-MustafaANimerKJH,et al.A country’s culture and reporting of sustainability practices in energy industries: does a corporate sustainability committee matter?Hum Soc Sci Commun2024; 11: 1–12.
9.
ColganJDGard-MurrayASHinthornM. Quantifying the value of energy security: how Russia's invasion of Ukraine exploded Europe's fossil fuel costs. Energy Res Soc Sci2023; 103: 103201.
10.
LuYWangYZuoJ, et al.Characteristics of public concern on haze in China and its relationship with air quality in urban areas. Sci Total Environ2018; 637: 1597–1606.
11.
SongMFisherRKwohY. Technological challenges of green innovation and sustainable resource management with large scale data. Technol Forecast Soc Change2019; 144: 361–368.
12.
LinSWangSMarinovaD, et al.Impacts of urbanization and real economic development on CO2 emissions in non-high income countries: empirical research based on the extended STIRPAT model. J Cleaner Prod2017; 166: 952–966.
13.
CortezMCAndradeNSilvaF. The environmental and financial performance of green energy investments: European evidence. Ecol Econ2022; 197: 107427.
14.
HangMGeyer-KlingebergJRathgeberAWJ.It is merely a matter of time: a meta-analysis of the causality between environmental performance and financial performance. Bus Strategy Environ2019; 28: 257–273.
15.
WangSWangHWangJ,et al.Does environmental information disclosure contribute to improve firm financial performance? An examination of the underlying mechanism. Sci Total Environ2020; 714: 136855.
16.
AlareeniBAHamdanA. ESG Impact on performance of US S&P 500-listed firms. Corp Gov: Int J Bus Soc2020; 20: 1409–1428.
17.
BaahCOpoku-AgyemanDAcquahISK, et al.Examining the correlations between stakeholder pressures, green production practices, firm reputation, environmental and financial performance: evidence from manufacturing SMEs. Sustain Prod Consum2021; 27: 100–114.
18.
BarauskaiteGStreimikieneD. Corporate social responsibility and financial performance of companies: the puzzle of concepts, definitions and assessment methods. Corp Soc Respons Environ Manage2021; 28: 278–287.
19.
LicandroOBurgueteJLVOrtigueira-SánchezLC,et al.Corporate social responsibility and financial performance: a relationship mediated by stakeholder satisfaction. Adm Sci2024; 14: 15.
20.
OkaforAAdeleyeBNAduseiM. Corporate social responsibility and financial performance: Evidence from US tech firms. J Cleaner Prod2021; 292: 126078.
21.
AdamkaiteJStreimikieneDRudzionieneK. The impact of social responsibility on corporate financial performance in the energy sector: evidence from Lithuania. Corp Soc Respons Environ Manage2023; 30: 91–104.
22.
FouratiYMDammakM. Corporate social responsibility and financial performance: international evidence of the mediating role of reputation. Corp Soc Respons Environ Manage2021; 28: 1749–1759.
23.
AliHYDanishRQAsrar-ul-HaqM. How corporate social responsibility boosts firm financial performance: the mediating role of corporate image and customer satisfaction. Corp Soc Respons Environ Manage2020; 27: 166–177.
24.
HomayounSMashayekhiBJahangardA, et al.The controversial link between CSR and financial performance: the mediating role of green innovation. Sustainability2023; 15: 10650.
JiangYWangCLiS,et al.Do institutional investors’ corporate site visits improve ESG performance? Evidence from China. Pacific-Basin Finance J2022; 76: 101884.
27.
AtuaheneSAXushengQ. A multidimensional analysis of corporate governance mechanisms and their impact on sustainable economic development: a case study of Ghana’s financial sector. Heliyon2024; 10: e24673.
28.
BenameurKHassaneinAAzzamMEA, et al.Future-oriented disclosure and corporate value: the role of an emerging economy corporate governance. J Appl Account Res 2023; 24: 25–46.
TosunOK. Changes in corporate governance: externally dictated vs voluntarily determined. Int Rev Fin Anal2021; 73: 101608.
31.
PaniaguaJRivellesRSapenaJ. Corporate governance and financial performance: the role of ownership and board structure. J Bus Res2018; 89: 229–234.
32.
NaeemNCankayaSBildikR. Does ESG performance affect the financial performance of environmentally sensitive industries? A comparison between emerging and developed markets. Borsa Istanb Rev 2022; 22: S128–S140.
33.
MaquieiraCPEspinosa-MéndezCAriasJT., The impact of environmental, social and governance (ESG) score on dividend payment of large family firms: what is the role of financial constraints?Int Evidence2024; 31: 2311–2332.
34.
YangCZhuCAlbitarK. ESG ratings and green innovation: AU-shaped journey towards sustainable development. Business Strat Environ2024; 33: 4108–4129.
35.
VelteP. Does ESG performance have an impact on financial performance? Evidence from Germany. J Glob Responsib 2017; 8: 169–178.
36.
CajiasMFuerstFMcAllisterP,et al.Do responsible real estate companies outperform their peers?Int J Strateg Prop Manag 2014; 18: 11–27.
37.
BalogunJBartunekJMDoB. Senior managers’ sensemaking and responses to strategic change. Organ Sci 2015; 26: 960–979.
38.
PettitKLBalogunJBennettM. Transforming visions into actions: strategic change as a future-making process. Organ Stud 2023; 44: 1775–1799.
39.
SchauerteRFeiereisenSMalterAJ. What does it take to survive in a digital world? Resource-based theory and strategic change in the TV industry. J Cult Econ 2021; 45: 263–293.
40.
JoussenTPKanbachDKKrausS., Enabling strategic change toward resilience: a systematic review from a dynamic capabilities perspective. Strateg Change 2024; 0: 1–33.
41.
VenusMStamDVan KnippenbergD. Visions of change as visions of continuity. Acad Manag J 2019; 62: 667–690.
42.
HuangfuLWangFLiuD,et al.The impact of performance expectation gap on corporate strategic change—evidence from listed companies in the IT industry. Int Bus Res 2021; 14: 1–46.
43.
ZhangAChenYXuX, et al.Impacts of resource alertness and change leadership style on financial performance: an empirical study. J Glob Inf Manage2021; 29: 45–60.
44.
BloodgoodJM. The influence of organizational size and change in financial performance on the extent of organizational change. Strateg Change2006; 15: 241–252.
45.
BackPRosingKDicklerTA, et al.CEOs’ temporal focus, firm strategic change, and performance: insights from a paradox perspective. Eur Manag J2020; 38: 884–899.
46.
BentleyFSKehoeRR. Give them some slack—they’re trying to change! The benefits of excess cash, excess employees, and increased human capital in the strategic change context. Acad Manage J2020; 63: 181–204.
47.
LarckerDFTayanBWattsEM. Seven myths of ESG. Eur Fin Manage2022; 28: 869–882.
48.
PriorDSurrocaJTribóJA. Are socially responsible managers really ethical? Exploring the relationship between earnings management and corporate social responsibility. Corporate Governance: An Int Rev2008; 16: 160–177.
49.
MengYWangX. Do institutional investors have homogeneous influence on corporate social responsibility? Evidence from investor investment horizon. Manage Fin2020; 46: 301–322.
50.
Vásquez-OrdóñezLRLassalaCUlrichK,et al.The impact of corporate social responsibility on the financial performance of renewable energy firms. Econ Res-Ekon Istraz2023; 36: 2174152.
51.
TsangAFrostTCaoH. Environmental, social, and governance (ESG) disclosure: a literature review. Brit Acc Rev2023; 55: 101149.
52.
EdmansA. The end of ESG. Financ Manage2023; 52: 3–17.
53.
ZhouGLiuLLuoS. Sustainable development, ESG performance and company market value: mediating effect of financial performance. Business Strat Environ2022; 31: 3371–3387.
54.
ChasiotisIGounopoulosDKonstantiosD, et al.Does ESG reputational risk affect the efficiency and speed of adjustment of corporate investment?Eur Fin Manage2024; 30: 839–878.
55.
BroadstockDCChanKChengLT,et al.The role of ESG performance during times of financial crisis: evidence from COVID-19 in China. Fin Res Lett2021; 38: 101716.
56.
CojoianuTFAscuiFClarkGL, et al.Does the fossil fuel divestment movement impact new oil and gas fundraising?J Econ Geogr2021; 21: 141–164.
57.
BaxKSahinÖCzadoC,et al.ESG, risk, and (tail) dependence. Int Rev Fin Anal2023; 87: 102513.
58.
AbdiYLiXCàmara-TurullX. Exploring the impact of sustainability (ESG) disclosure on firm value and financial performance (FP) in airline industry: the moderating role of size and age. Environ Dev Sustain2022; 24: 5052–5079.
59.
LiangLLiY. The double-edged sword effect of organizational resilience on ESG performance. Corp Soc Respons Environ Manage2023; 30: 2852–2872.
60.
ElsayedNHassaneinA.Is voluntary risk disclosure informative? The role of UK firm-level governance. Int J Product Perform Manag 2024, 73, 1826–1855.
61.
ChenSZhangJLiuC. Environmental regulation, financing constraints, and enterprise emission reduction: evidence from pollution levy standards adjustment. J Fin Res2021; 9: 51–71.
62.
WangQSunTLiR.Does artificial intelligence (AI) enhance green economy efficiency? The role of green finance, trade openness, and R&D investment. Human Soc Sci Commun 2025; 12: 1–22.
63.
ZhouGLiuLLuoS.Sustainable development, ESG performance and company market value: mediating effect of financial performance. Business Strategy the Environment 2022, 31, 3371–3387.
64.
ZhouGLiuLLuoS. Sustainable development, ESG performance and company market value: mediating effect of financial performance. Bus Strategy Environ2022; 31: 3371–3387.
65.
ShenLZhouJSkitmoreM,et al.Application of a hybrid entropy–McKinsey matrix method in evaluating sustainable urbanization: a China case study. Cities2015; 42: 186–194.
66.
HeYJiaoZYangJ. Comprehensive evaluation of global clean energy development index based on the improved entropy method. Ecol Indic2018; 88: 305–321.
67.
GaoPWangXWangH.A correction to the entropy weight coefficient method by Shen et al. for accessing urban sustainability [Cities 42 (2015) 186–194]. Cities2020; 103: 102742.
68.
ZhangDWangCMiaoS,et al.The impact of firm's ESG performance on the skill premium: evidence from China's green finance reform pilot zone. Int Rev Fin Anal2024; 93: 103213.
69.
LiangLLiY. The double-edged sword effect of organizational resilience on ESG performance. Corp Soc Respons Environ Manage2023; 30: 2852–2872.
70.
HeXZhuLYangC,et al.Enterprises’ strategic change under operating difficulties: test of hypothesis of “Poverty Leads to Change”. China Ind Econ2017; 1: 135–154.
71.
BehlAKumariPRMakhijaH,et al.Exploring the relationship of ESG score and firm value using cross-lagged panel analyses: case of the Indian energy sector. Ann Oper Res2022; 313: 231–256.
72.
BrunaMGLopreviteSRaucciD, et al.Investigating the marginal impact of ESG results on corporate financial performance. Fin Res Lett2022; 47: 102828.
73.
LiangLLiY.The double-edged sword effect of organizational resilience on ESG performance. Corp Soc Responsib Environ Manag 2023; 30: 2852–2872.
74.
BorghesiSCainelliGMazzantiM. Linking emission trading to environmental innovation: evidence from the Italian manufacturing industry. Res Policy2015; 44: 669–683.
75.
HarrowerK. Networked and integrated urban technologies in sustainable smart energy systems. Geopolit Hist Int Relat2020; 12: 45–51.
76.
ZhangDMengLZhangJ. Environmental subsidy disruption, skill premiums and ESG performance. Int Rev Fin Anal2023; 90: 102862.
77.
XieY. The interactive impact of green finance, ESG performance, and carbon neutrality. J Cleaner Prod2024; 456: 142269.
78.
LiuFKangYGuoK,et al.The relationship between air pollution, investor attention and stock prices: evidence from new energy and polluting sectors. Energy Policy2021; 156: 112430.
79.
ValaskovaKGajdosikovaDLazaroiuG. Has the COVID-19 pandemic affected the corporate financial performance? A case study of Slovak enterprises. Equilib Q J Econ Econ Policy2023; 18: 1133–1178.
80.
RuelSEl BazJ. Disaster readiness’ influence on the impact of supply chain resilience and robustness on firms’ financial performance: a COVID-19 empirical investigation. Int J Prod Res2023; 61: 2594–2612.
81.
ChenCLiW-BZhangH. How do property rights affect corporate ESG performance? The moderating effect of green innovation efficiency. Fin Res Lett2024; 64: 105476.
82.
WangMWangYWenS. ESG performance and green innovation in new energy enterprises: does institutional environment matter?Res Int Business Finance2024; 71: 102495.
83.
AzzamMEAYAlsayedMSHAlsultanA,et al.How big data features drive financial accounting and firm sustainability in the energy industry. J Financ Report Account 2024; 22: 29–51.
84.
WangQSunTLiR. Does artificial intelligence promote green innovation? An assessment based on direct, indirect, spillover, and heterogeneity effects. Energy Environ2025;36: 1005–1037.
