ESG practices and financing constraints of Chinese high-carbon enterprises under carbon reduction pressure: The role of credit financing and corporate reputation

Our study investigates how ESG practices affect financing constraints in high-carbon enterprises under decarbonization pressure. While ESG is widely recognized for mitigating financing frictions, its effectiveness for carbon-intensive firms remains unclear. Using panel data on Chinese listed high-carbon enterprises from 2013 to 2023, we find that ESG practices significantly alleviate financing constraints, primarily by enhancing credit access and improving corporate reputation. Among the three ESG components, only environmental practices exhibit statistically significant effects. Moreover, carbon reduction pressure amplifies these benefits. The effect is more pronounced among firms with low ESG rating divergence, limited reliance on bank financing, and no government subsidies. Our findings underscore the financial importance of environmental efforts and suggest that targeted ESG engagement can help high-carbon enterprises manage risks associated with the low-carbon transition.