Government environmental protection expenditure and national ESG performance: Global evidence

Abstract

Drawing on comprehensive indicator data of national ESG performance across 27 countries from 2006 to 2020, this study employs a panel Tobit model to examine the impact of government environmental protection spending on national ESG performance. The results demonstrate that government environmental protection spending has a significant and positive effect on national ESG performance. Moreover, the analysis of heterogeneity indicates that the allocation of funds towards environmental protection not only bolsters the ecological and societal performance of a nation, but also elevates its governance standards. Additionally, the mechanism analysis highlights that augmenting government spending on environmental protection leads to an upsurge in green innovation, which in turn has a positive impact on the national ESG performance. This study offers crucial insights into the factors that drive national ESG performance, specifically through the lens of government spending on environmental protection. It provides valuable guidance to policy makers on how to optimize such spending and enhance the national ESG performance.