Enterprise digitalization and bank-enterprise ESG consistency: Evidence from China

As digitalization and sustainability become central to global economic strategies, understanding their intersection is critical for facilitating a low-carbon transition. This paper examines the impact of enterprise digitalization on bank-enterprise ESG consistency within China’s bank-led financial system, an underexplored context in the existing literature. Utilizing loan data from listed companies and banks between 2008 and 2022, we uncover a significant ‘U-shaped’ relationship: initial digitalization enhances ESG alignment by improving transparency and reducing information asymmetry, but excessive digitalization overwhelms banks’ technological and risk assessment capacities, leading to increased financing constraints that undermine ESG consistency. Additionally, the impact of digitalization on ESG consistency varies across enterprises: greater access to credit tends to enhance its positive effects, while wider digital divides tend to diminish them. These findings underscore the need for a balanced approach to digitalization, ensuring that technological advancements align with ESG goals to effectively support sustainable development.