Endangering China's environmental health security goals through negative environmental investor behaviours

China sees the need to maximise its environmental health security as a major priority in its sustainable development agenda. This is at the heart of China's “ecological civilisation” and “beautiful China” dream. One of the objectives of this dream is to sensitize investors to invest in health and environmental stocks to support environmental health goals. However, both the Shanghai and the Shenzhen stock markets continue to witness contemporaneous movement (herding behaviour) by investors from environmental stock to perceived safer stocks and this is stifling the growth of the environmental health sector due to capital deprivation. Our paper evaluates the significance and potential effect of this herding trend among environmental stocks using a collection of sophisticated econometric models namely, the state‐space model, enhanced state‐space model, the cross‐sectional SD (CSSD) and the cross‐sectional absolute deviation (CSAD). The models are used to evaluate firm‐level data collected from the 80 environmental stocks indexed by the KGRM MSCI China IMI Environment 10/40 Index. Three of the models confirm the presence of endemic negative (herding) investor behaviour among environmental stocks in China and this threatens the sustainability of environmental stock capital to promote China's environmental health goals. We have proposed measures to ameliorate the risks posed by such negative contemporaneous investor behaviours.