R&D Expenditures and ESG Disclosure

Previous research has highlighted several firm-specific determinants of ESG disclosure; however, the link with R&D activities remains largely underexplored, despite the distinctive characteristics of such investments. We argue that R&D is characterized by asset specificity, uncertainty, and growth prospects, which generate informational frictions and shape firms’ disclosure incentives. This study is motivated by the need to understand how innovation-related opacity influences ESG reporting in the context of increasing demand for non-financial disclosure by capital market participants. Based on 12,025 European firm-year observations over the period 2014–2024 and fixed-effects estimations, we find that R&D intensity is positively associated with ESG disclosure, and this relationship is strengthened by board independence. Robustness tests using GMM estimations and disaggregated ESG components confirm the results. The study is relevant because R&D-related opacity can affect how investors and stakeholders assess firms’ long-term value creation and sustainability orientation. Theoretically, the study extends ESG disclosure literature by highlighting innovation-related informational frictions as a key determinant of sustainability reporting. Practically, the findings suggest that investors and regulators should consider firms’ R&D intensity and governance structures when evaluating ESG transparency and disclosure quality.