From Industrial Growth to Sustainable Governance: Unpacking the Asymmetric Effects of Digitalization, Industry Value-Added, and Energy Innovation on ESG Performance in the G7 Economies

This study explores the influence of industry value-added, energy technology investments, trade openness, and digitalization on environmental, social, and governance (ESG) performance across G7 countries from 2000 to 2022, controlling for world uncertainties and financial development. The driving effects at different levels of ESG performance are evaluated through employing the ‘Method of Moments Quantile Regression’ (MMQR) alongside Driscoll–Kraay (DK) and Two-Stage Least Squares (2-SLS) techniques to handle cross-sectional heterogeneity and endogeneity. The empirical findings presented in this research demonstrate the consistent positive influence of industry value-added and trade openness on ESG outcomes across all estimations and quantiles. The effect of energy technology investments is strong and positive at the lower and median ESG quantiles and diminishes at upper quantiles. Mean-based estimates from DK and 2-SLS confirm the driving role of energy technology investments. Alternatively, digitalization’s influence is insignificant at the lower- and median-quantiles and becomes positive and statistically significant at higher ESG quantiles. This study presents valuable insights based on these non-linear and quantile-dependent dynamics for strategic policymaking, showing the importance of prioritizing energy technology investments in developing ESG regimes for strong foundational sustainability. Conversely, unlocking higher-tier environmental and governance capabilities among mature ESG countries can be achieved through leveraging of advanced digital infrastructure.