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Shaping sustainable future: The role of central bank in galvanizing corporate ESG performance

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  • Xiao, Zumian
  • Ma, Shiqun
  • Zhang, Zhenqi
  • Xiang, Lijin

Abstract

In June 2018, the People's Bank of China (PBOC) adopted a groundbreaking initiative by including green assets as eligible collateral for the Medium-term Lending Facility (MLF). This paper utilizes this policy shift as a quasi-natural experiment to explore its effects on corporate ESG performance. Employing a difference-in-differences approach, our findings reveal a significant enhancement in the ESG scores of affected companies following the implementation of the policy. Further inquiry into the dynamics underlying this improvement suggests that the policy alleviates financing constraints and fosters green innovation and operational efficiency among these companies, thereby boosting their ESG performance.

Suggested Citation

  • Xiao, Zumian & Ma, Shiqun & Zhang, Zhenqi & Xiang, Lijin, 2024. "Shaping sustainable future: The role of central bank in galvanizing corporate ESG performance," Finance Research Letters, Elsevier, vol. 67(PA).
    • Handle: RePEc:eee:finlet:v:67:y:2024:i:pa:s1544612324008171
    DOI: 10.1016/j.frl.2024.105787
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    References listed on IDEAS

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    4. Tsang, Albert & Wang, Kun Tracy & Liu, Simeng & Yu, Li, 2021. "Integrating corporate social responsibility criteria into executive compensation and firm innovation: International evidence," Journal of Corporate Finance, Elsevier, vol. 70(C).
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    More about this item

    Keywords

    ESG; Central bank; Eligible collateral; Sustainable development;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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