Financial strength and ESG participation: evidence from Thailand's tax-incentivized ESG policy

Purpose This study reconceptualizes the environmental, social and governance (ESG)–finance nexus from an outcome-driven to an enabler-driven perspective by examining financial capacity as a boundary condition for sustainability participation. Using Thailand's 2023 tax-incentivized ESG policy as a natural experiment, the paper argues that institutional incentives alone are insufficient to drive adoption if firms fall below a critical financial resource threshold. Design/methodology/approach Drawing on institutional and resource orchestration theories, the study investigates the relationship between financial performance indicators and ESG rating attainment for 610 Thai publicly listed firms. Using Welch's analysis of variance and regression models, it identifies specific financial gatekeepers – grouped into valuation, profitability, liquidity and asset management dimensions – that determine a firm's ability to achieve recognition under the Stock Exchange of Thailand ESG (SETESG) rating framework. Findings The results show that firms with stronger profitability and valuation metrics – particularly return on assets, earnings per share and price-to-book value – were significantly more likely to obtain ESG ratings. Financially weaker firms remained largely excluded, revealing a sustainability gap that highlights the unequal effects of market-based policy interventions. Practical implications The study cautions that market-based ESG incentives may inadvertently reinforce financial asymmetries. To avoid siloing sustainability benefits among elite firms, policymakers should implement tiered disclosure frameworks and targeted capacity-building programs that assist resource-constrained firms in meeting institutional mandates. Originality/value This paper extends resource-orchestration and institutional-complexity theories by identifying financial capacity as a threshold mechanism rather than a mere outcome. It provides a sophisticated benchmark for international public policy, demonstrating how “inclusive” sustainability reforms can generate exclusionary effects in emerging economies if firm-level financial boundaries are ignored.