Environmental, social, and governance (ESG) performance, along with the novelty of innovation, are significant factors in promoting sustainable development for corporations. This study employs the Heckman two-stage model to examine the impact of ESG performance on innovation novelty using a dataset comprising A-share listed companies in the Shanghai and Shenzhen Stock Exchanges from 2011 to 2020. The results indicate that enhanced ESG performance significantly fosters innovation by expanding innovation resources and mitigating agency problems. Further analysis reveals that this relationship is more pronounced under high economic policy uncertainty, a challenging information environment, elevated financing constraints, and in the context of digital transformation. This study not only expands the research on the economic implications of ESG performance for enterprise innovation behavior but also places a distinct emphasis on innovation quality rather than quantity. Additionally, this study enriches the existing literature on the factors influencing innovation novelty and extends research into the link between environmental protection and firm innovation, particularly from the perspective of stakeholder theory. Furthermore, this study holds practical significance for governments aiming to enhance ESG evaluation systems and establish guiding policies that encourage novel innovations, ultimately contributing to sustainable and high-quality development. Simultaneously, this study provides guidance to enterprises by encouraging them to embrace green development, improve social responsibility, and elevate their governance standards to promote innovation quality.
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