["Business Strategy and the Environment, EarlyView. ", "\nABSTRACT\nThis study investigates the intricate relationship between environmental, social, and governance (ESG) performance and firm risk, emphasizing the moderating role of green innovation in the unique context of Chinese publicly listed firms. Using a comprehensive dataset from 2015 to 2022, the analysis employs three‐stage least squares (3SLS) and system generalized method of moments (GMM) techniques to address endogeneity and ensure robustness. The findings reveal that ESG performance reduces systematic risk but exacerbates insolvency risk and stock price volatility, underscoring its multifaceted impact on firm vulnerability. Green innovation emerges as a critical moderator, amplifying ESG's benefits by mitigating systematic risk while simultaneously elevating insolvency and total risks under specific conditions. These results extend stakeholder theory and the resource‐based view by uncovering the conditional dynamics through which ESG practices and innovation interact to influence firm outcomes. The study offers actionable insights for policymakers and corporate leaders, highlighting the strategic integration of ESG frameworks and innovation as essential for managing risk and achieving sustainable growth, particularly in emerging markets. By contextualizing ESG within the post‐COVID‐19 landscape, this research illuminates pathways for enhancing organizational resilience amid global uncertainties.\n"]