Abstract:

Aim: The study was conducted to evaluate the impact of SDG-related investment on the financial performance of FTSE 100 firms. The study also investigated the moderating impact of ownership structure.

Method: For this purpose, the study utilised data from 70 firms of the FTSE 100 index selected based on different market capitalisation groups from 2015 to 2024 to capture this dynamic over a more extended period. The analysis was conducted using GLS regression due to heteroscedasticity and autocorrelation.

Findings: The findings indicated that SDG (B = -0.495, p-value = 0.000) negatively and significantly impacts the ROA. SDG (B = 2.695, p-value = 0.001) positively and significantly impacts the ROE. Executive ownership (B = 1.692, p-value = 0.006) significantly and positively moderates the relationship between SDG and ROA. Institutional ownership (B = 0.133, p-value = 0.565) has an insignificant and positive moderating role on the relationship between SDG and ROA. Ownership concentration (B = 2.560, p-value = 0.012) positively and significantly moderates the relationship between SDG and ROA. Executive ownership (B = 1.873, p-value = 0.505) has an insignificant and positive moderating role on the relationship between SDG and ROE. Institutional Ownership (B = -0.776, p-value = 0.274) has an insignificant and negative moderating role in the SDG and ROE relationship. Ownership concentration (B = -16.199, p-value = 0.001) positively and significantly moderates the relationship between SDG and ROE.

Implications: The findings highlighted the unique governance and market dynamics in developed economies, suggesting that ownership can affect performance directly but not through SDG investments.

Keywords: SDG-related investment, financial performance, ownership structure, ownership concentration, institutional ownership, ROA, ROE.

1. INTRODUCTION

The United Nations’ Sustainable Development Goals (SDGs) of 2015 have emerged as an essential global corporate strategy framework. The companies increasingly use SDGs to align investments to contribute to environmental stewardship, social Equity, and economic growth (Halisçelik & Soytas, 2019; Montiel et al., 2021). This trend comes as a larger understanding that sustainable business drives long-term value, brand reputation, and risk mitigation concerning regulatory shifts and stakeholder demands (Zioło et al., 2023) However, the financial implications of making such SDG-related investments have continued to be debated. While some research, such as Saha et al. (2024) and Shen et al. (2024), finds positive relationships between sustainability initiatives and financial performance by firms, other research, such as Naibaho & Shahab (2025), finds costs and risks that might suppress short-term profitability. This study empirically investigates the role of SDG investment on the financial performance of the FTSE-100 companies and the moderating role of ownership structure.

FTSE-100 companies, as major multinational enterprises, have unique problems in this regard. Under extreme regulatory examination and high investor expectations, these companies must reconcile substantial financial rewards with heavy sustainability commitments. The interplay of implementing various SDGs into business operations, combined with global supply chain threats and changing stakeholder pressures, is a key management challenge (Necib & Jarboui, 2025). In addition, the absence of agreed-upon metrics to measure the financial effects of SDG investments makes decision-making more difficult (Ceesay et al., 2021). An insight into how FTSE-100 companies manage these dynamics is important for formulating effective strategies that maximize sustainability and profitability.

While there has been growing emphasis on sustainability, little research has addressed how ownership structure moderates the link between SDG-related investment and firm financial performance, especially in large multinationals. Even most existing studies, like Saha et al. (2024) and Shen et al. (2024), look at the direct impacts of SDG activities while ignoring the governance mechanisms, such as ownership concentration and executive or institutional ownership. Previous work, (Naibaho & Shahab, 2025 and Al Lawati, 2022), concentrates on emerging economies or small companies, not capturing the complexities of the regulatory and stakeholder contexts of FTSE-100 companies. This work bridges this literature gap by exploring Ownership as a moderator within sustainability–performance relationships.

It is significant to conduct this study because it responds to an essential gap in the current literature by empirically exploring how different forms of Ownership, concentrated, executive, and institutional, moderate the relationship between SDG investments and a firm’s financial performance. Firms are investing more in sustainability, but the financial performance of such investment is unknown, particularly in high-profile firms such as those in the FTSE-100. By investigating the moderating effect of ownership, the research contributes insightful knowledge into how different governance mechanisms create strategic sustainability outcomes. The findings can inform policymakers, investors, and business leaders on how to maximise governance models for maximising both sustainability effects and profit.

This study contributes to the existing sustainability-performance literature in three ways. It empirically analyses the moderating effect of ownership structures on the interaction relationship between investments in SDGs and firm financial performance, particularly in terms of ownership concentration, executive Ownership, and institutional Ownership. Besides, the current study’s findings shall shed light on how different governance mechanisms shape the strategic and financial implications of sustainability investments in multinationals. Third, the results provide actionable implications for policymakers, investors, and corporate executives seeking to align governance arrangements with long-term sustainable value creation. Hence, this study contributes to scholarly and policy discussions of how best to design ownership and governance arrangements to facilitate sustainable development in the private sector.

The paper is organized as follows: Section 2 reviews the related literature and theories supporting the findings. Section 3 provides a methodological overview of the techniques and approaches used to conduct this research. Section 4 discusses the results and presents the study’s findings. Section 5 discusses findings, and Section 6 concludes with implications and future research.

2. LITERATURE REVIEW

2.1. Theoretical Framework

The research question about the relationship between SDGs and financial performance can be better understood with the help of stakeholder theory, indicating that companies are successful since they fulfil the interests of all stakeholders and not only the shareholders. Stakeholder theory suggests that a company’s success is contingent upon fulfilling the expectations of various stakeholders, such as workers, consumers, investors, communities, and the natural world. For the research, stakeholder theory offers a valuable framework for exploring how SDG investments affect the financial performance of firms. By incorporating SDG projects into corporate strategy, companies signal responsiveness to stakeholder issues concerning social Equity, environmental sustainability, and ethical governance, which are increasingly focused on by investors, regulators, and consumers alike (Habib et al., 2025).

The theory maintains that companies practicing sustainability establish trust, legitimacy, and long-term stakeholder relations, which can translate to improved reputation, employee commitment, operational effectiveness, and financial outcomes. In contrast to agency theory, which aims to reconcile managerial and shareholder interests, stakeholder theory focuses on all the groups affected by the firm’s operations. The approach applies to FTSE-100 firms operating within intricate, global markets with diverse, ever-changing stakeholder expectations (Saha et al. 2024). Thus, the stakeholder theory supports the view that investments related to SDG projects are ethical imperatives and strategic acts that can bring competitive advantage and sustainable profitability through value co-creation.

The agency theory helps in understanding the moderating role of ownership structure. Agency theory identifies how ownership structure affects managerial action and firm performance by resolving conflicts between agents and principals. Ownership concentration, executive Ownership, and institutional Ownership all enhance alignment of managers with shareholders through increased monitoring and lower agency costs. Such types of Ownership encourage adherence to long-term plans, e.g., SDG investments, by ensuring that managers focus on sustainable value creation rather than short-term benefits (Alshareef, 2024; Casciello et al., 2025; Shafai & Abd-Mutalib, 2024). Thus, they can moderate the interaction between SDG investments and firm performance by instilling disciplined monitoring, mitigating managerial opportunism, and facilitating effective resource allocation towards sustainable development objectives (Jibril, 2024; Truong, 2025; Yang et al., 2024).

In the framework of this research, agency theory is especially applicable to describing how various modes of Ownership, including ownership concentration, executive Ownership, and institutional Ownership, can be used as governance tools to control agency conflicts. Ownership concentration usually increases shareholders’ monitoring capacity relative to management, thus decreasing the probability of opportunistic activity and inducing more constrained, value-driven decision-making (Truong, 2025). Executive Ownership, in which managers have significant equity holdings, aligns manager and shareholder interests by internalizing the costs and benefits of choice (Wardan & Rizki, 2024). Likewise, institutional investors, due to their resources and expertise, tend to take an active role in corporate governance, enhancing transparency and accountability (Wu et al., 2022; Attarit et al., 2025). These ownership structures become particularly crucial when companies make long-term, strategic investments like those related to the SDGs. Since SDG-targeted investments tend to have high upfront costs and ambiguous future benefits, agency theory predicts that managers will favour short-term gains over long-term sustainability efforts in the absence of robust governance. Ownership structures that minimize agency costs can thus support managerial allegiance towards SDG investments by facilitating longer planning horizons and efficient resource allocation.

However, the current literature does not provide empirical evidence on the moderating role of ownership structure on the relationship between SDG investment and firm performance. Furthermore, the research on SDG investment is increasing, and there is not much empirical evidence conducted in this regard, with the most recent study of Javed et al. (2024), which has specifically investigated the impact of SDG investment on financial performance. To the best of the researcher’s knowledge, much is not yet developed around these dynamics in the current literature. Hence, this study contributes to the current knowledge by providing empirical evidence on the moderating role of ownership structure on the relationship between SDG investment and firm performance.

2.2. SDG Investment and Financial Performance

The correlation between investment for SDGs and financial performance can be understood with the aid of stakeholder theory, which says that companies are successful because they fulfil the interests of all stakeholders and not shareholders alone. Investment in SDGs builds trust, reputation, and long-term stakeholder relationships, contributing to customer loyalty, employee commitment, and access to capital (Habib et al., 2025; Qaderi, 2025; Schena et al., 2025). These contribute towards greater operational efficiency and lower risk, ultimately leading to better financial performance. By adopting society’s objectives, companies generate shared value, wherein environmental and social value is converted into sustained profitability (Lin et al., 2025; Haris et al., 2025; and Sarwar et al., 2024). Therefore, when carefully managed, SDG-related investments can generate social impact alongside financial return.

The study of Shen et al. (2024) investigated the impact of SDGs on financial performance. The study used the period from 2010 to 2020 from a dataset of 2744 Chinese firms. The study found that SDG-related financial performance activities are positive and significant. The study of Saha et al. (2024) investigated the impact of SDG practices on financial performance. It has considered the top-listed companies in finance, manufacturing, and technology industries of 100 organisations from 17 countries in developed, developing, and emerging economies. The study found the positive impact of SDG-related investment on financial performance.

Furthermore, Lin et al. (2025) conducted a study to evaluate the impact of SDG on financial performance, considering the sample of 380 companies from different countries in the automobile industry. It has been found that SDGs significantly and positively impact the financial performance of the companies. These findings were also supported by the studies, such as Al Lawati (2022) conducted in Oman, Berreta et al. (2024) conducted in Italy, and (Kayed & Meqbel, 2025) conducted in Europe, which revealed a positive impact of SDG on the financial performance. However, the study of (Naibaho & Shahab, 2025) evaluated this relationship using the 100 firms listed in the Fortune 500 in the industrials, materials, and energy sectors from 2019 to 2023. The study findings indicated the negative effect of SDGs on the companies’ financial performance, indicating that SDG-related risks reduce their performance. There has been a mixed consensus among previous research, where the studies have either obtained positive or negative effects. Based on these empirical studies, the following hypothesis is developed:

H1: SDG-related investment has a significant and positive impact on the financial performance

2.3. Moderating Role of Ownership Structure

Executive Ownership describes the degree to which executives of a firm own shares in the company (Yue et al., 2025). Executive Ownership, based on agency theory, serves to align managerial (agent) interests with those of shareholders (principals), minimising agency conflicts and encouraging long-term firm value-enhancing decisions (Wardan & Rizki, 2024). In the context of SDG-related investment, executive Ownership can exert a pivotal moderating influence on the effects of such investments on firm performance.

When top managers hold significant ownership stakes, they are more likely to focus on long-term, value-creating activities, like investments that align with the SDG, since their personal fortunes directly correlate with the long-term performance of the company (Gulzar et al., 2024; and Talha et al., 2025). Such Ownership motivates them to make thoughtful decisions about SDG initiatives that maximise social and financial returns (Lassala et al., 2021; Sarwar et al., 2023). In addition, owner-executives are less inclined to pursue short-termism, making them more likely to pursue SDG investments that are costly in the short term but profitable in the long term. In contrast, in low-executive-ownership firms, managers do not have incentives to pursue or manage SDG investments effectively, as they perceive them as a drag or a side activity (Jan et al., 2021). Executive Ownership thus reinforces the positive association between SDG investments and financial performance by promoting strategic fit, responsibility, and long-term value creation. Based on the literature, it can be hypothesised that;

H2: Executive Ownership has a significant moderating effect on the relationship between SDG-related investment and financial performance

Ownership concentration refers to the Degree to which major, influential shareholders own a company’s shares (Chen et al., 2021). Under agency theory, high ownership concentration minimizes agency problems by allowing large shareholders to have more control over management decisions, thus aligning managerial actions with shareholder interests. In the case of SDG-related investments, ownership concentration is an important moderating factor in influencing their effects on firm performance (Meqbel et al., 2025).

Concentrated ownership firms are more capable of enforcing and tracking SDG investments. Large owners have a long-term time horizon and enough power to make sustainability efforts that are not symbolic but strategically embedded in business practice. They have enough clout to ensure that they induce sustainable practices that build the company’s reputation, minimise risk exposure, and maximize operating efficiency, thus leading to improved financial performance (Saeed et al., 2025).

Additionally, concentrated owners can more likely call for transparency and quantifiable returns from SDG investments, decreasing the likelihood of managerial opportunism or misallocation of resources. On the other hand, dispersedly owned firms can be challenged by coordination and monitoring, constraining the strategic value of SDG initiatives (Wardan & Rizki, 2024). Thus, ownership concentration reinforces the positive effect of SDG-related investments on firm performance through improving governance, accountability, and long-term strategic concentration. Hence, it can be hypothesised that;

H3: Ownership Concentration has a significant moderating effect on the relationship between SDG-related investment and financial performance

Institutional Ownership is the shareholding of firms like pension funds, insurance companies, mutual funds, and other financial institutions. Such investors generally have significant resources, professional skills, and long-term investment horizons, thus significantly influencing corporate governance (Velte, 2023). In agency theory, institutional owners act as powerful watchdogs on management, minimising agency conflicts and fostering accountability (Wu et al., 2022).

Within SDG-linked investments, institutional Ownership has the potential to moderate between sustainability initiatives and company performance strongly (Sarwar et al., 2025; Shaukat et al., 2024). Institutional investors increasingly encourage environmental, social, and governance (ESG) integration, observing that SDG-linked strategies can lower risk, catalyse innovation, and improve long-term financial performance. Their active involvement, through voting rights, shareholder proposals, and communications with management, helps to ensure that SDG investments are value-creating in nature and not mere gestures (Yahaya, 2025).

Additionally, institutional owners require more transparency, uniform reporting, and measurable effects, making the SDG initiatives more effective. They also exert reputational pressure on companies to take sustainability seriously. For companies with high institutional Ownership, SDG investment is more likely to be well-prepared, properly executed, and well-accepted by the market (Bashiru et al., 2022). Institutional Ownership consolidates the positive relationship between SDG investment and firm performance through intensified monitoring, credibility, and strategic orientation (Wardan & Rizki, 2024). Hence, it can be hypothesised that;

H4: Institutional Ownership has a significant moderating effect on the relationship between SDG-related investment and financial performance

2.4. Conceptual Framework

Fig. (1) shows the conceptual framework of the study. The theoretical framework of this research examines the connection between SDG-related investment and firm financial performance, moderated by ownership structure. Based on stakeholder and agency theories, the framework suggests that SDG-targeted investments can improve a firm’s financial performance through enhanced stakeholder relations, operational performance, and long-term value creation (Jiang et al., 2023). Nevertheless, the direction and magnitude of this relationship can differ under different ownership structures for firms. Three aspects of ownership structure, executive Ownership, concentration of Ownership, and institutional Ownership, are suggested to serve as moderators. Executive Ownership realigns managerial interests with shareholder interests, promoting strategic commitment towards SDGs. Concentration of Ownership allows controlling shareholders to influence sustainability decisions to ensure accountability and efficacy. Institutional Ownership introduces professional monitoring, requiring transparency and incorporation of ESG disciplines (Wu et al., 2022).