Eco-innovation and corporate profitability: The shielding effect of ESG under Geopolitical Uncertainty

Abstract

[EN]Over the last decade, eco-innovation has become a strategic pillar of business competitiveness. However, its financial impact is currently being affected by a global environment marked by unprecedented systemic uncertainty. This study contributes to finance literature by analyzing how geopolitical risk affects the profitability of green investments. It hypothesizes that international geopolitical tensions disrupt the mechanisms through which eco-innovation influences operational performance. Using a sample of 5744 companies and 48,015 observations from 2014 to 2024, we find that eco-innovation exerts short-term pressure on corporate profitability but becomes especially valuable as a resilience mechanism in periods of high geopolitical uncertainty.