Climate finance and the labor income share of enterprises: Evidence from China

Climate finance refers to the financing that addresses climate change. Its implementation affects industrial relations, and the labor income share of enterprises. This study conducts theoretical and empirical analyses to explore the impact of climate finance on the labor income share of Chinese A-share listed enterprises. Leveraging panel data spanning from 2008 to 2022 and drawing on strategic choice theory, the research reveals a positive U-shaped relationship between climate finance and enterprises’ labor income share. Mediation analysis further uncovers that climate finance reduces labor income share by increasing debt default risk while raising it through a higher labor-capital ratio. Industry heterogeneity analysis indicates that the negative effect is more pronounced in heavy-pollution industries. As the first investigation of the climate finance-labor income share nexus in China, this study offers crucial insights for policymakers balancing environmental and labor market objectives.