Nonlinear effects of ESG performance on sustainable development goals: Evidence from artificial intelligence, renewable energy, and institutional quality thresholds

The mobilization of private capital under ESG mandates relies on the untested premise that ESG performance, scored at the firm level and aggregated to countries, converts into the public outcomes measured by the Sustainable Development Goals. Whether that conversion occurs, and under what conditions, remains contested. This study investigates the relationship between country-level ESG performance and SDG attainment across 61 countries over 2000-2024. We construct a novel entropy-weighted composite ESG index integrating 60 indicators across environmental, social, and governance dimensions. ESG performance raises SDG attainment on average, and this effect survives instrumental-variable, sensitivity, and placebo tests. Threshold regression then uncovers nonlinear dynamics: using AI, renewable energy, and institutional quality as threshold variables, the ESG–SDG relationship is negligible below critical thresholds but amplifies once countries surpass them, a pattern consistent with capacity-dependent regime switching. ESG adoption thus advances sustainable development only where complementary information, infrastructure, and institutional capacity are already in place.