ESG performance and corporate environmental investment: Incentive or inhibition?

Yue Li, Xiaoxia Zhao and Xinfang Yang

Finance Research Letters, 2025, vol. 75, issue C

Abstract: Environmental, Social and Governance (ESG) performance is essential for accelerating environmental protection investment and promoting sustainable development under the "dual carbon" goals. This study, based on an analysis of 2,710 listed companies on China's Shanghai and Shenzhen A-share markets, reveals a significant positive correlation between ESG performance and environmental investment. ESG enhances environmental investment by alleviating financing constraints, strengthening internal oversight, reducing agency costs, and improving information disclosure quality. The effect is particularly pronounced in regions with advanced digital finance and in non-heavy pollution, technology-intensive industries.

Keywords: ESG; Environmental Investment; Financing Constraints; Internal Oversight; Agency Costs (search for similar items in EconPapers)
JEL-codes: G11 G32 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:75:y:2025:i:c:s1544612325000790

DOI: 10.1016/j.frl.2025.106814

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