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ESG rating and financial risk of mining industry companies

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  • Fu, Changluan
  • Yu, Chenyang
  • Guo, Mengting
  • Zhang, Lin

Abstract

The mining industry is one of the pillar industries of the manufacturing industry, characterized by high pollution, high energy consumption, and financial fragility. ESG ratings have a significant influence on the financial risks of mining industry companies. This paper employs quarterly data from Chinese listed mining companies from 2009 to 2021 to empirically analyze the impact of ESG ratings on the financial risks of mining companies. It explores the mechanisms through which ESG ratings influence the financial risks of mining companies in terms of resource support, risk control, and governance effects. The findings suggest that improving ESG performance helps mitigate financial risks for mining companies. In terms of the underlying mechanisms, ESG performance alleviates financing constraints, enhances risk control, mitigates agency problems with large shareholders, and thus reduces financial risks. The conclusion of this paper proves that ESG rating is an important lever in promoting green economic development. Developing countries should strengthen the disclosure of ESG information of heavily polluting companies, play the financial guidance role of ESG information, and promote such companies to embark on the path of green development.

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  • Fu, Changluan & Yu, Chenyang & Guo, Mengting & Zhang, Lin, 2024. "ESG rating and financial risk of mining industry companies," Resources Policy, Elsevier, vol. 88(C).
    • Handle: RePEc:eee:jrpoli:v:88:y:2024:i:c:s030142072301019x
    DOI: 10.1016/j.resourpol.2023.104308
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    2. Yajuan Tian, 2024. "Will Informal Institutions Affect ESG Rating Divergence? Evidence from Chinese Confucian Culture," Sustainability, MDPI, vol. 16(22), pages 1-21, November.
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