Comment on “Inclusive Wealth and <scp>ESG</scp> Practices: Financial Impacts in a Global Context”

Xie et al. (2026) revisit the longstanding question of how corporate sustainability relates to financial performance and introduce inclusive wealth (IW)—a composite measure of produced, human, and natural capital—as a country-level moderator. Their study highlights the heterogeneity across countries and empirically documents that the association between sustainability and financial performance is positively moderated by IW. Below, I discuss how this study contributes to the literature, how prior analytical models help interpret the empirical findings, and several empirical caveats, as well as potential ways to address these concerns. The most noteworthy contribution of this paper is the introduction of IW as a moderating factor in the sustainability–financial performance relationship. This adds to the growing empirical evidence that the financial implications of sustainability performance are contingent on the macro environment. Prior studies show, for instance, that abnormal returns to corporate sustainability performance depend on market sentiment (Naughton et al. 2018), that the financial payoffs to corporate social responsibility are evident during the financial crisis (Lins et al. 2017), and that socially responsible investing outperforms during economic booms but underperforms during recessions (Bansal et al. 2022). By proposing IW as a moderator, Xie et al. (2026) add a novel construct that captures long-term resources and complements existing macro conditioning factors of the sustainability–financial performance relationship. Analytical models suggest that the extent to which more sustainable firms deliver superior financial performance depends on the overall sustainability concerns and preferences in the market (Pedersen et al. 2020; Pástor et al. 2021). These analytical insights help interpret the different results for the return on assets (ROA) and Tobin's Q in Xie et al. (2026). The association between sustainability performance and ROA can be read as reflecting customers' sustainability preferences. In economies with a high IW, especially those rich in natural capital, customers are more likely to favor sustainable products, hence raising the profitability of firms with superior sustainability performance. However, this does not apply to produced capital, which does not reflect customers' sustainability preferences and may even be negatively correlated with public sustainability awareness. In comparison, the relationship between sustainability performance and Tobin's Q is more complex because market valuations aggregate several forces. A firm's share price not only reflects investors' sustainability preferences, but also the extent to which sustainability performance translates into profitability and the non-monetary utility investors derive from holding high sustainability firms. When IW improves, all three forces could move simultaneously, making the implications for Tobin's Q ambiguous. In this sense, the empirical results in Xie et al. (2026) are consistent with the view that macro conditions jointly shape both operating and valuation outcomes. These results highlight the complexity of IW's moderating role, which warrants further exploration in future research. Although the empirical design in Xie et al. (2026) is well-suited to documenting cross-country heterogeneity, several issues merit attention to sharpen interpretation and facilitate generalization. The first concern relates to the measurement of corporate sustainability performance. The study relies on sustainability scores from a single provider, Moody's. This raises several issues about information disadvantage in foreign markets (Chen et al. 2025), rating bias due to commercial ties (Li et al. 2024), and the well-documented divergence among different rating agencies (e.g., Chatterji et al. 2016; Berg et al. 2022). Because data collection and scoring methodologies can differ across languages and disclosure regimes, the quality of ratings may systematically correlate with levels of IW. Therefore, additional tests using alternative proxies for corporate sustainability performance would help enhance the results' robustness and generalizability. The second issue involves the model specification. The use of multilevel models with random effects is useful for estimating country-level differences; however, it rests on the assumption that the unobserved country effects are uncorrelated with the regressors (Wooldridge 2010). This exogeneity assumption may not be valid in the current setting. As shown in Xie et al.'s (2026) figures 1 and 2, country characteristics are associated with corporate sustainability ratings. Furthermore, countries with higher IW could have more developed financial markets, more progressive social norms, and more regulated sustainability disclosures, each of which could shift the sustainability-financial performance link in the same direction. Hence, additional tests controlling for country fixed effects and comparing IW with other country-level measures could help clarify the incremental role of IW. The last area for further analysis concerns the different components of IW and their incremental role relative to gross domestic product (GDP). As shown by Managi et al. (2024), produced capital grows over time in patterns similar to GDP, human capital increases more slowly, whereas natural capital decreases. These trends suggest distinct roles for each component and their different channels in moderating the corporate sustainability–financial performance relationship. Natural capital may reflect public environmental concerns, human capital could correlate with social norm progressiveness, whereas produced capital may capture resource exploitation for economic growth. Therefore, further decomposing the moderation effect and testing their incremental explanatory power after controlling for GDP would help understand the different channels and nuances. Taken together, Xie et al. (2026) make a timely and valuable contribution by highlighting how IW conditions the financial implications of corporate sustainability performance. Their findings open pathways for future studies to examine the nuanced interdependence between the broader system and private sector in pursuing sustainable growth and provide relevant policy implications.