Policy Lessons From the Load Capacity Curve: <scp>ESG</scp> and Economic Strategies for Sustainable <scp>OECD</scp> Futures

ABSTRACT This paper is an analysis of the environmental, social, governance, and economic factors (ESG‐ECF) and the environmental quality measured by the Load Capacity Factor (LCF) in 30 OECD countries in the years between 2000 and 2024. The analysis is based on the Method of Moments Quantile Regression (MMQR) that captures the heterogeneous effects of the LCF distribution and solves endogeneity and nonlinearity. To determine the validity of the hypothesis of the Load Capacity Curve (LCC), the squared income term is added. Although the LCC frameworks have been previously examined, the originality of the presented research is that the ESG dimensions are incorporated into the quantile‐based model of environmental performance, providing a more detailed expression of the way these elements interact at the various levels of ecological capacity. The empirical evidence is in agreement with the fact that the environmental pressures (ENF) have a significant negative impact on LCF at all quantiles, as evidenced by consistent empirical evidence. The only factor that has a positive influence is governance (GOF) in countries that perform well, and social (SOF) and economic (ECF) factors are not statistically significant overall. The LCC hypothesis is rejected because the coefficients of the economic growth and its squared value are non‐significant, which shows the absence of a nonlinear relation with environmental quality. The validity of these results is confirmed by robustness checks on system GMM based on two‐step systems. These findings imply that the policy interventions in OECD countries ought to concentrate more on reducing the amount of direct environmental stress by the use of interventions like management of water resources, forest conservation, and uptake of renewable energy. In countries that already have greater sustainability, institutional strengthening is an important consideration. The results highlight that a combination approach to ESG policies should be used to attain long‐term environmental objectives, although environmental governance and regulation hold the main position.