How Does ESG Performance Drive Firms’ Green Transformation under China’s “Dual Carbon” Goals? Empirical Evidence from A-share Listed Companies

Main Article Content

Xiaoxuan Ouyang
School of Economics and Management, Xiamen University Malaysia, Jalan Sunsuria, Bandar Sunsuria, 43900 Sepang, Malaysia

DOI: https://doi.org/10.70267/esg2026.v3n1.1024

Keywords

ESG performance, green innovation, dual carbon goals, R&D investment, financing constraints

Abstract

Under the background of the “dual carbon” goals and high-quality development, corporate green transformation has become a key pathway to promote sustainable economic development. This study aims to systematically examine whether and how corporate ESG performance drives green technological innovation. Using data from Chinese A-share listed companies from 2009 to 2023, a two-way fixed effects model is constructed and validated through various robustness and endogeneity tests. The empirical results show that ESG performance significantly promotes green technological innovation, and this conclusion remains robust after replacing variable measures, adjusting time windows, and controlling for high-dimensional fixed effects. Mechanism analysis reveals that ESG performance primarily drives green innovation indirectly through two channels: increasing R&D investment and alleviating financing constraints. Furthermore, heterogeneity analysis indicates that this promoting effect is more pronounced in state-owned enterprises and firms with female executives. The findings provide empirical evidence and policy implications for improving ESG governance systems and advancing corporate green transformation.

Abstract 9 | PDF Downloads 4

References

  • [1] Fu, Q., Zhao, X. and Chang, C.-P. Does ESG performance bring to enterprises’ green innovation? Yes, evidence from 118 countries. Oeconomia Copernicana. 2023, 14(3), pp. 795-832.
  • [2] Liang, K., Cao, Z., Tang, S., Hu, C. and Zhang, M. Evaluating the influence of environmental, social, and governance (ESG) performance on green technology innovation: Based on Chinese a-share listed companies. Sustainability. 2025, 17(3), p. 1085. https://doi.org/10.3390/su17031085.
  • [3] Long, H., Feng, G.-F., Gong, Q. and Chang, C.-P. ESG performance and green innovation: An investigation based on quantile regression. Business Strategy and the Environment. 2023, 32(7), pp. 5102-5118. https://doi.org/10.1002/bse.3410.
  • [4] Zhang, H., Lai, J. and Jie, S. Quantity and quality: The impact of environmental, social, and governance (ESG) performance on corporate green innovation. Journal of environmental management. 2024, 354, p. 120272. https://doi.org/10.1016/j.jenvman.2024.120272.
  • [5] Yuan, H., Luan, H. and Wang, X. The Impact of ESG Rating Events on Corporate Green Technology Innovation under Sustainable Development: Perspectives Based on Informal Environmental Regulation of Social Systems. Sustainability. 2024, 16(19), p. 8308. https://doi.org/10.3390/su16198308.
  • [6] Zhai, Y., Cai, Z., Lin, H., Yuan, M., Mao, Y. and Yu, M. Does better environmental, social, and governance induce better corporate green innovation: The mediating role of financing constraints. Corporate Social Responsibility and Environmental Management. 2022, 29(5), pp. 1513-1526. https://doi.org/10.1002/csr.2288.
  • [7] Zhang, W., Zhao, Y. and Meng, F. ESG performance and green innovation of Chinese enterprises: Based on the perspective of financing constraints. Journal of Environmental Management. 2024, 370, p. 122955. https://doi.org/10.1016/j.jenvman.2024.122955.
  • [8] Zhou, Y., Huo, W., Bo, L. and Chen, X. Impact and mechanism analysis of ESG ratings on the efficiency of green technology innovation. Finance Research Letters. 2023, 58, p. 104591. https://doi.org/10.1016/j.frl.2023.104591.
  • [9] Gao, X., He, X., Sun, C., Wu, D. and Zhang, J. Innovation in shouldering green responsibility: ESG performance and green technology innovation. Energy Economics. 2025, 142, p. 108197. https://doi.org/10.1016/j.eneco.2025.108197.
  • [10] Lu, Y., Zhao, Y., Liu, L. and Shi, G. ESG Ratings and Green Innovation. Sustainability. 2024, 16(24), p. 10869. https://doi.org/10.3390/su162410869.
  • [11] Yang, C., Zhu, C. and Albitar, K. ESG ratings and green innovation: AU‐shaped journey towards sustainable development. Business Strategy and the Environment. 2024, 33(5), pp. 4108-4129. https://doi.org/10.1002/bse.3692.
  • [12] Geng, Y., Chen, J. and Liu, R. ESG rating disagreement and corporate green innovation bubbles: Evidence from Chinese A-share listed firms. International Review of Financial Analysis. 2024, 95, p. 103495. https://doi.org/10.1016/j.irfa.2024.103495.
  • [13] Shi, Y. and Yao, T. ESG Rating Divergence: Existence, Driving Factors, and Impact Effects. Sustainability. 2025, 17(10), p. 4717. https://doi.org/10.3390/su17104717.
  • [14] Lian, Y., Li, Y. and Cao, H. How does corporate ESG performance affect sustainable development: A green innovation perspective. Frontiers in Environmental Science. 2023, 11, p. 1170582. https://doi.org/10.3389/fenvs.2023.1170582.
  • [15] Zhang, X., Li, W., Ji, T. and Xie, H. The impact of ESG performance on firms’ technological innovation: evidence from China. Frontiers in Environmental Science. 2024, 12, p. 1342420. https://doi.org/10.3389/fenvs.2024.1342420.
  • [16] Shalhoob, H. and Hussainey, K. Environmental, social and governance (ESG) disclosure and the small and medium enterprises (SMEs) sustainability performance. Sustainability. 2022, 15(1), p. 200. https://doi.org/10.3390/su15010200.
  • [17] Batool, F., Alhidary, I. A., Boda, J. R., Alwadi, B. M., Khudoykulov, K. and Haseeb, M. Balancing Sustainability and Profitability: The Financial Effect of Green Innovation in Chinese High-Pollution Industries. Sustainability. 2025, 17(8), p. 3610. https://doi.org/10.3390/su17083610.
  • [18] Wang, M., Wang, Y. and Wen, S. ESG performance and green innovation in new energy enterprises: does institutional environment matter? Research in International Business and Finance. 2024, 71, p. 102495. https://doi.org/10.1016/j.ribaf.2024.102495.
  • [19] Fang, X. M. and Hu, D. Corporate ESG performance and innovation: Evidence from a-share listed companies. Economic Research. 2023, 58(2), pp. 91-106, https://d.wanfangdata.com.cn/periodical/CiBQZXJpb2RpY2FsQ0hJU29scjkyMDI2MDIwMjE0MTYxMhINamp5ajIwMjMwMjAwNxoIYWoxd2F5am0%3D.
  • [20] Cai, Q., Chen, Y. and Lin, K. Credit availability and firm innovation: incentive or inhibitor?: Micro-evidence based on bank branch data and financial geography. Economic Research. 2020, 55(10), pp. 124-140.
  • [21] Whited, T. M. and Wu, G. Financial constraints risk. The review of financial studies. 2006, 19(2), pp. 531-559. https://doi.org/10.1093/rfs/hhj012.

Article Sidebar

PDF
Published
Feb 9, 2026
Issue
Vol. 3 No. 1 (2026)
Section
Research Articles
Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

How to Cite

Ouyang, X. (2026). How Does ESG Performance Drive Firms’ Green Transformation under China’s “Dual Carbon” Goals? Empirical Evidence from A-share Listed Companies. Environment, Social and Governance, 3(1), 10-24. https://doi.org/10.70267/esg2026.v3n1.1024

Similar Articles

11-20 of 21

You may also start an advanced similarity search for this article.