Between Sustainability and Strategy: How Does <scp>ESG</scp> Uncertainty Shape Corporate Investment via Cash Holdings in <scp>BRICS</scp>

ABSTRACT Growing attention to sustainability has placed environmental, social, and governance (ESG) factors at the center of corporate decision‐making, yet uncertainty surrounding ESG policies and practices continues to create challenges for firms. The objective of this study is to investigate the impact of ESG uncertainty (SUN) on corporate investment (CIN), while examining the mediating role of cash holdings (CHO) in this relationship. The analysis is based on firm‐level data covering the period 2010 to 2023 for BRICS economies and employs robust econometric techniques, including fixed effects, two‐stage least squares, and system GMM, supported by relevant pre‐estimation tests to ensure consistency and validity. The results demonstrate that SUN significantly reduces corporate investment as firms tend to delay or cut capital commitments under ambiguous sustainability conditions. At the same time, SUN induces higher cash holdings, reflecting precautionary financial behavior, while greater liquidity reserves further constrain investment, confirming the mediating channel. The study provides meaningful policy and managerial implications, emphasizing the need for regulatory stability, improved ESG disclosure standards, and financing mechanisms that can reduce excessive liquidity hoarding. Socially, the findings underscore how ESG‐related ambiguity, if left unaddressed, can hinder sustainable transformation and economic development. The novelty of this research lies in bridging the ESG uncertainty gap with the corporate finance literature by demonstrating how cash holdings serve as a transmission mechanism, thereby offering fresh insights into the financial consequences of sustainability risks.