Abstract:

Against the backdrop of global sustainable development， companies' environmental， social， and governance （ESG） has become a key strategy for addressing environmental challenges， achieving sustainable development goals， and building long - term competitive advantages.Bearing in mind the uncertainty of the current economic environment， as well as the strategic uncertainty caused by the exclusivity of competitive and signaling effects in corporate ESG practices， a theoretical model is constructed using global games and incorporates higher - order beliefs to capture the “interactive rationality” of strategic interactions between enterprises， examining their ESG investment strategies under environmental and strategic uncertainties.Contrary to traditional Bayesian games where participants' payoffs are independently distributed and fully known， global games relax the assumption that the payoff structures of participants are common knowledge under complete information. Participants cannot accurately estimate the payoffs of the game but receive a noisy private signal about the payoffs， the distribution of which is public information. By combining private and public information to infer others' beliefs， participants assume any payoff is possible before observing the signal. This relaxation ensures a unique equilibrium in noisy games， avoiding the issue of multiple Nash equilibria.The results reveal that， contrary to intuition， environmental uncertainty helps promote corporate ESG investment. The decomposition and path analysis of the effects of strategic uncertainty on corporations show that when the competitive effect is relatively small， companies will invest in ESG as long as they observe a sufficiently high return signal. However， when the competitive effect is significant， a company’s ESG incentive depends on the size of the investment cost. Particularly， when the investment cost is at a medium level， the company's investment incentive fluctuates in an “N” shape as its return belief increases. Additionally， the signaling effect of ESG provides a constant compensatory role in corporate investment incentives， and consumer learning positively moderates this compensatory effect. Moreover， government subsidies for corporate ESG investments increase the incentive for companies to invest in ESG， while the establishment of higher environmental quality standards has the opposite effect. The conclusions of this study have significant theoretical and practical implications for the government in formulating effective ESG incentive mechanisms and related supporting policies.

Key words: ESG, uncertainty, global game, competitive effect, signal effect