Navigating Uncertainty: How Climate Policy Uncertainty Drives Firms’ Green Transformation

Zhi Zhang, Yuan Hong, Ziyao Yang (), Liming Chen () and Yanhong Feng
Additional contact information
Zhi Zhang: School of Economics and Trade, Hunan University, Changsha 410006, China
Yuan Hong: School of Economics and Trade, Hunan University, Changsha 410006, China
Ziyao Yang: School of Economics and Management, Hunan Institute of Traffic Engineering, Hengyang 421200, China
Liming Chen: School of Finance and Statistics, Hunan University, Changsha 410006, China
Yanhong Feng: School of Economics, Management and Law, University of South China, Hengyang 421000, China

Sustainability, 2025, vol. 17, issue 18, 1-22

Abstract: As climate change intensifies, climate-related policy instruments have become essential tools for governments to mitigate climate risks. The formulation of such policies typically involves balancing economic growth and ecological goals while ensuring fairness and feasibility, often resulting in frequent policy adjustments. Drawing on panel data from A-share listed firms in China between 2008 and 2023, this study conducts a comprehensive investigation into how climate policy uncertainty affects corporate green transformation, with a particular focus on the underlying mechanisms. The empirical evidence shows that climate policy uncertainty serves as a significant catalyst in promoting firms’ green upgrading. Mechanism analysis indicates that this uncertainty has enhanced enterprises’ environmental awareness, encouraged their green investment, and promoted strategic planning oriented towards environmental sustainability. Further heterogeneity analysis reveals that the positive effect is especially pronounced in state-owned enterprises, labor-intensive industries, and firms exposed to high levels of climate risk. This study enriches the understanding of corporate behavioral responses under climate-related policy uncertainty and offers practical implications for optimizing policy design to support sustainable transformation in the corporate sector.

Keywords: climate policy uncertainty; firms’ green transformation; climate risk (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/2071-1050/17/18/8370/pdf (application/pdf)
https://www.mdpi.com/2071-1050/17/18/8370/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:17:y:2025:i:18:p:8370-:d:1752375

Access Statistics for this article

Sustainability is currently edited by Ms. Alexandra Wu

More articles in Sustainability from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().