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ESG performance and corporate environmental investment: Incentive or inhibition?

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  • Li, Yue
  • Zhao, Xiaoxia
  • Yang, Xinfang

Abstract

Environmental, Social and Governance (ESG) performance is essential for accelerating environmental protection investment and promoting sustainable development under the "dual carbon" goals. This study, based on an analysis of 2,710 listed companies on China's Shanghai and Shenzhen A-share markets, reveals a significant positive correlation between ESG performance and environmental investment. ESG enhances environmental investment by alleviating financing constraints, strengthening internal oversight, reducing agency costs, and improving information disclosure quality. The effect is particularly pronounced in regions with advanced digital finance and in non-heavy pollution, technology-intensive industries.

Suggested Citation

  • Li, Yue & Zhao, Xiaoxia & Yang, Xinfang, 2025. "ESG performance and corporate environmental investment: Incentive or inhibition?," Finance Research Letters, Elsevier, vol. 75(C).
    • Handle: RePEc:eee:finlet:v:75:y:2025:i:c:s1544612325000790
    DOI: 10.1016/j.frl.2025.106814
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    More about this item

    Keywords

    ESG; Environmental Investment; Financing Constraints; Internal Oversight; Agency Costs;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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