How Institutional Environments Shape the <scp>ESG</scp> –Growth Relation: Evidence From Europe

ABSTRACT As global financial markets increasingly integrate non‐financial criteria, companies are reinforcing the strategic role of sustainability and its impact on market value, although this cannot overlook how different institutional structures shape investor perceptions. This study examines (i) whether firms with higher environmental, social and governance (ESG) performance are perceived by markets as having greater future growth opportunities, and (ii) how institutional environments, measured through the dimensions of the Quintuple Helix Model (QHM), namely the economic, educational, political–legal, cultural and environmental systems, condition this relationship. Based on a panel of European listed companies over the 2013–2023 period, we find that companies with stronger sustainability performance are generally associated with higher growth potential, suggesting that ESG engagement is recognized by investors as a relevant dimension of organizations' expectations. The analysis also reveals cross‐country differences in this association, consistent with the idea that markets interpret sustainability through their own institutional contexts.