Do ESG and SDG-9 innovations enhance financial performance? Empirical evidence from India’s Top 100 listed firms (2019–2023)

Abstract

Sustainable innovation has become an important driver of corporate value creation inemerging economies like India, where firms increasingly align their operations with Environmental, Social, and Governance (ESG) practices and Sustainable Development Goal 9 (SDG-9). Despite this rising importance, the financial impact of ESG and SDG-9 innovations on firm performance remains underexplored in the Indian con text. This study aims to empirically examine the impact of ESG and SDG-9 innova tions on firm value, profitability, and shareholder returns among the top 100 listed Indian companies during the period 2019–2023. Using panel data drawn from the Bloomberg and Refinitiv databases, the study applies multiple regression models and random-effects estimations to evaluate the relationships between innovation indica tors (ESG and SDG-9 scores) and financial metrics such as Tobin’s Q, Return on Assets (ROA), and Return on Equity (ROE). The findings reveal that ESG innovation scores do not have a statistically significant effect on firm value and profitability. In contrast, SDG-9 innovation exhibits a positive and significant relationship with both ROA and ROE, indicating that companies integrating infrastructure, industrialization, and in novation goals achieve superior financial performance. On average, firms reporting SDG-9 innovations show a 4.27-point higher ROE and 0.51-point improvement in ROA than non-reporting firms. These results highlight that SDG-9 aligned innovation contributes directly to financial value creation, whereas ESG innovation yields more intangible or long-term benefits, offering critical insights for managers, investors, and policymakers promoting sustainable business growth in India