The increasing focus on Sustainability and Responsible Investing (SRI) attributes Environmental, Social and Governance (ESG) performance as a key determinant of a firm’s corporate social responsibility and value creation over a longer horizon. Simultaneously, governments more and more use tax policy as a tool to encourage responsible corporate behaviour and advance a country’s sustainable development goals. Nevertheless, the interaction of tax policy and ESG performance has been, paradoxically, the least understood. This paper integrates theory and evidence to explain how tax policies might reasonably buffer the relationship between ESG performance and corporate behaviour particularly in tax-motivated investment, expenditure, and sustainability disclosure. This conceptual paper employs stakeholder theory, legitimization theory, and institutional theory to construct a model to explain tax policies in a discretionary manner as (i) external market forces on corporations to adopt ESG policies and (ii) to improve the legal risk and discretionary tax policies of the corporation. This paper primarily focuses on public policy, sustainability and taxation in the ESG context. It identifies the evidence of the poor cross-disciplinary integration, the inconsistency in the ESG and the Incentives metrics, and the lack of focus on the developing countries. This paper aims by highlighting primary research directions that attempt to investigate how financially oriented public policies can better align with the ESG trajectories of corporations in developing countries. Empirical research based on the proposed conceptual model can assist policymakers in predicting tax incentive arrangements to help achieve sustainable developmental goals.