Does Corporate ESG Performance Influence Carbon Emissions?

Ziyang Liu (), Baogui Yang, Bernadette Andreosso-O’Callaghan and Xiaoao Zhang
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Ziyang Liu: School of Energy and Mining Engineering, China University of Mining and Technology, Beijing 100083, China
Baogui Yang: School of Energy and Mining Engineering, China University of Mining and Technology, Beijing 100083, China
Bernadette Andreosso-O’Callaghan: Kemmy Business School, University of Limerick, V94 T9PX Limerick, Ireland
Xiaoao Zhang: School of Energy and Mining Engineering, China University of Mining and Technology, Beijing 100083, China

Sustainability, 2025, vol. 17, issue 17, 1-23

Abstract: Against the backdrop of increasingly severe global carbon emissions and China’s commitment to achieving carbon peaking by 2030, accelerating the transition to a low-carbon economy has become an urgent priority. As fundamental microeconomic entities, enterprises play a crucial role in the national governance of carbon emissions. This study uses panel data on Chinese A share listed companies from 2019 to 2023 and employs fixed effects models that control for firm, year, and industry effect to analyze how ESG performance influences carbon emissions and through which mechanism. The findings indicate that improvements in ESG ratings significantly reduce firms’ carbon emissions. This effect operates primarily through the following two channels: (1) promoting green technological innovation, thereby enhancing environmental performance, and (2) increasing the attention of financial analysts, which strengthens external monitoring. The heterogeneity analysis further reveals that the mitigating effect of ESG improvement on carbon emissions is more pronounced in firms with a lower proportion of institutional ownership, while this effect is relatively weaker in firms with higher institutional ownership. This suggests that in contexts where institutional investors hold a smaller share, firms may place greater emphasis on the policy pressure and social responsibility expectations associated with ESG performance, thereby exhibiting stronger commitment to emission reduction actions. In contrast, in firms dominated by institutional investors, the implementation of ESG policy objectives may be partially compromised due to the investors’ short-term profit orientation. This study provides empirical evidence for firms to fulfill their environmental and social responsibilities and offers actionable insights for investors aiming to promote sustainable development. From a policy perspective, the findings also offer theoretical support for developing differentiated regulatory strategies based on variations in ownership and shareholding structures.

Keywords: ESG; carbon emissions; green innovation; analyst attention institutional ownership (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2025
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