Regional climate change action and corporate ESG performance - Evidence from China

Abstract

This study investigates the influence of regional climate change actions on corporate ESG performance. This study uses the Climate Resilient City Construction (CRCC) to represent China's regional climate change action. It uses data from Chinese listed companies from 2013 to 2020 to determine how the CRCC affects corporate ESG performance. The results show that the CRCC can significantly improve corporate ESG performance. In addition, institutional investor shareholding and board diversity can effectively enhance the positive impact of the CRCC on corporate ESG performance. Mechanism analysis shows that the CRCC can increase government financial incentives and corporate green innovation, stimulating firms to improve ESG performance. Finally, the results of heterogeneity analysis show that the CRCC has a more substantial impact on firms located in regions with more severe climate hazards, higher GHG concentrations, and temperate monsoon climate zones, as well as those with a lack of political connections and a higher degree of digital transformation. This study reveals how the CRCC improves corporate ESG performance through theoretical analysis and measures the marginal impact of the CRCC on f corporate ESG performance through empirical analysis. These new findings provide suggestions for policymakers and market participants to address climate change.