Green policy and corporate social responsibility: Empirical analysis of the Green Credit Guidelines in China

In the past four decades, several countries have imposed environmental regulations to enforce green policy and corporate reduction of industrial emissions and waste. Unlike other environmental regulations, China's Green Credit Guidelines internalize firms' environmental risks into a loan channel; firms with high environmental credit risks encounter high barriers to obtaining loans. To investigate whether, and to what extent, this approach promotes corporate social responsibility, we introduce a Modified Environmental, Social, Governance (MESG) index that uses disaggregated firm-level data to measure the level of engagement in corporate social responsibility. We find that, after the promulgation of the Green Credit Guidelines, there was a significant increase in social responsibility in firms restricted by the Guidelines relative to firms not restricted by the Guidelines.