Climate policy uncertainty exposure and corporate ESG performance: Evidence from China

Abstract

We delve into the impact of China’s Climate Policy Uncertainty exposure (CCPUE) on corporate Environmental, Social, and Governance (ESG) performance from 2010 to 2020. Our analysis reveals a notably positive relationship between CCPUE and the ESG rating of Chinese firms. This finding retains its significance even after subjecting it to robustness checks. Furthermore, the results of mechanism tests indicate that the primary finding is mediated through external attention and internal governance channels. Additionally, our study uncovers that CCPUE exerts a particularly pronounced effect on enhancing ESG performance among firms with weaker green innovation capacities, facing higher green transition pressure, and SOE firms. In sum, our research provides unique insights into the influence of climate policy uncertainty on corporations, shedding light on its implications for ESG performance in the Chinese context.