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The governance effects of green investors: A perspective on reducing natural dependency

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  • Cai, Hanyi

Abstract

This study examines how green institutional investors influence corporate reliance on ecosystem services, a critical yet understudied dimension of nature-related financial risk. We match Chinese A-share listed companies (2010–2023) with firm-level nature dependence data from Garel et al. (2025), yielding a panel dataset of 23,415 firm-year observations from 2822 companies. Our analysis reveals that green investors significantly reduce corporate nature dependence, with stronger effects among firms with dispersed ownership, non-state-owned enterprises, and non-heavily polluting industries. The reduction is particularly pronounced for dependencies on climate regulation, water resources, and soil protection services. Mechanism tests identify three channels through which green investors operate: enhancing managerial environmental awareness, strengthening green governance practices, and promoting environmental investment. This study advances the sustainable finance literature by providing micro-level evidence on how institutional investors with environmental preferences shape corporate nature risk management, offering novel insights into the mechanisms through which green finance facilitates sustainable business transformation.

Suggested Citation

  • Cai, Hanyi, 2026. "The governance effects of green investors: A perspective on reducing natural dependency," Finance Research Letters, Elsevier, vol. 89(C).
    • Handle: RePEc:eee:finlet:v:89:y:2026:i:c:s1544612325024377
    DOI: 10.1016/j.frl.2025.109188
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    Keywords

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    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • Q57 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Ecological Economics
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • 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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