The Impact of Regional Carbon Emission Reduction on Corporate ESG Performance in China

Abstract

The integrated planning of central and local emission reduction tasks is crucial for achieving sustainable economic development, and corporate ESG performance aligns with the principles of sustainable development, having become a prominent topic in academic research. This paper empirically investigates the impact of regional carbon emission reductions on the ESG performance of local enterprises from 2009 to 2021 using provincial carbon emission data from China. The findings indicate that regional carbon emission reductions significantly enhance the ESG performance of local firms. The underlying mechanism is that regional carbon emission reductions facilitate local enterprises obtaining green credit, attracting media coverage and green investors and thus improving ESG performance. Second, heterogeneity tests reveal that regional carbon emission reductions enhance the ESG performance of local firms more significantly in regions with stricter environmental regulations, within heavily polluted industries, and among less digitized enterprises. Finally, further analysis demonstrates that regional residents’ carbon emission reductions can enhance the ESG performance of local enterprises, with regional carbon emission reductions exerting a dual effect after improving ESG performance. The findings of this study provide valuable insights into the low-carbon development of various economic entities and the collaborative promotion of economic green transformation.