Can Carbon Finance Correct Strategic ESG Behavior of Enterprises? Evidence from China

The study focuses on A-share listed companies in China from 2009 to 2022, employing a difference-in-difference-in-differences (DDD) model across multiple time points to systematically assess the impact and corrective effects of carbon finance on strategic ESG behaviors. The research reveals several key findings. Firstly, the implementation of carbon emissions trading policy significantly corrects strategic environmental, social, and governance (ESG) behaviors of enterprises. Notably, compared to mitigating ESG “greenwashing,” these policies effectively reduce the phenomenon of “brownwashing.” Secondly, from a financial perspective, carbon finance influences strategic ESG behaviors through three primary mechanisms: financing effect, resource allocation effect, and green innovation effect. Thirdly, the study identifies that the suppressive impact of carbon emissions trading policy on strategic ESG behaviors is more pronounced among non-state-owned enterprises, companies with higher capital market and environmental attention, robust corporate governance and those operating in regions with developed factor markets and less government economic intervention. Examining how carbon emission trading leverages market mechanisms to rectify strategic ESG behaviors provides valuable insights for carbon finance theory. Moreover, these findings hold significant implications for policymakers aiming to strengthen carbon trading platforms, enhance carbon finance systems, and refine ESG information disclosure frameworks.