Green Financial Reform and Corporate ESG Performance in China: Empirical Evidence from the Green Financial Reform and Innovation Pilot Zone

Abstract

Does the establishment of pilot zones for green finance reform and innovations in 2017 have an impact on the Environment, Social and Governance (ESG) scores of enterprises? This paper selects data from Chinese A-share listed companies from 2014–2020 and uses the differences-in-differences (DID) model to analyze the impact of green financial reform on the ESG scores of enterprises. The study shows that the establishment of the Green Financial Reform and Innovation Pilot Zone (GFPZ) policy helps enterprises to obtain higher ESG scores through environmental, social and governance mechanisms. When ESG is measured using environmental, social and governance data, our results suggest that the contribution of green finance reforms to ESG scores is primarily driven by social responsibility scores. The adjustment effect analysis shows that for large enterprises in the GFPZ, the above effects have stronger influence, but there is no significant difference between heavily polluting and non-heavily polluting firms in the GFPZ. Expansive analysis shows that the improvement in ESG scores of enterprises in the GFPZ not only contributes to the green performance of enterprises, but also to their financial performance.

Has the establishment of green finance reform and innovation pilot zones improved air quality? Evidence from China

“…Some scholars used the establishment of GFRIs as a natural experiment to explore the implementation effects of green finance policies. The establishment of GFRIs reduces enterprises' inefficient and excessive investment in the pilot zone, improves their investment efficiency (Yan et al, 2022), and helps enterprises obtain higher SEG scores through environmental, social, and governance mechanisms (Chen et al, 2022). The establishment of GFRIs improves enterprises' quality and quantity of green innovation (Zhang and Li, 2022).…”

Emerging new themes in green finance: a systematic literature review

“…The Green Financial Reform and Innovation Pilot Zones (GFPZ) policy's effect on the ESG ratings of Chinese A-share listed firms between 2014 and 2020 is examined in another study. The findings showed that the GFPZ policy raises ESG scores, which are mainly based on social responsibility, and helps businesses in the pilot zones do better financially and environmentally [17]. In 2023, Shao and Huang [111] reviewed China's green finance policy mix, showing a shift toward market-based approaches and greater private sector engagement, influenced by dynamic vertical interactions between different levels of government.…”

Why Do Employees Show Pro-Environmental Behaviors? A Perspective of Environment Social Responsibility

“…Although past research has examined the positive impacts of environmental social responsibility [ 53 , 54 , 55 ], limited research investigates how the mediating perspective of green commitment and the moderating perspective of institutional pressure affect the domain of employee sustainable behavior. Consequently, past research ignores the key position of green commitment and institutional pressures for pro-environmental behaviors.…”