The impact of ESG ratings on low carbon investment: Evidence from renewable energy companies

Abstract

With the driving force of carbon neutrality and carbon peaking goals, enhancing low-carbon investment (LCI) in renewable energy companies has important carbon reduction significance. This study analyzed the impact of environmental, social, and governance (ESG) on LCI. Based on CSMAR and WIND databases, a sample of renewable energy listed companies from 2012 to 2021 is used to further construct and quantify an indicator system for LCI. Firstly, compared to companies without ESG rating, ESG rating can promote a 2.1 % increase in LCI. Secondly, compared to the decrease and unchanged ESG rating, an increase in ESG rating will further promote LCI. Thirdly, ESG ratings have a high promoting effect on prospective LCI, soft LCI, terminal LCI, and managed LCI. Fourth, ESG rating will increase LCI by alleviating financing constraints, government subsidy and mitigating internal control risks, whlie, ESG ratings can reduce LCI by increasing manager confidence, information disclosure and management costs. Fifth, ESG produces spillovers, and the spillover effect of ESG ratings in the same region is more significant than that in the neighboring regions. This study provides implications for promoting LCI and promoting ESG ratings for renewable energy companies.