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Green investments and their effect on ESG ratings: An empirical analysis of Chinese publicly traded companies

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  • Hou, Bo
  • Huang, Wenhui
  • Wang, Xiji
  • Wang, Jizhou

Abstract

The effect of green investments on the Environmental, Social, and Governance (ESG) ratings of Chinese publicly listed corporations is investigated in this research. We investigate the differences in ESG performance between state-owned companies (SOEs) and non-state-owned enterprises (NSOEs) using data covering 2009–2023 using a Linear mixed-effect model. Our results reveal that, especially in NSOEs, green investments greatly improve the environmental and social elements of ESG ratings; SOEs exhibit better governance ratings as a result of these investments. The study also emphasizes how diverse the ownership structure affects ESG ratings, thereby reflecting distinct strategic goals and regulatory effects. The findings imply that adopting green investments not only raises ESG ratings but also helps to lower environmental risks and enhance stakeholder interactions, thereby supporting the dual benefits of sustainability practices. Policymakers should take into account using incentives that promote long-term sustainability objectives, including tax exemptions or subsidies for businesses embracing environmentally friendly practices, thereby improving the effect of green investments.

Suggested Citation

  • Hou, Bo & Huang, Wenhui & Wang, Xiji & Wang, Jizhou, 2025. "Green investments and their effect on ESG ratings: An empirical analysis of Chinese publicly traded companies," Research in International Business and Finance, Elsevier, vol. 74(C).
    • Handle: RePEc:eee:riibaf:v:74:y:2025:i:c:s027553192400463x
    DOI: 10.1016/j.ribaf.2024.102670
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