Can green credit policies improve corporate ESG performance?

Abstract

Abstract Green credit policy, as an environmental regulation instrument in the financial sector, is gradually having an impact on corporate performance in environmental, social, and corporate governance (ESG). Based on the implementation of the Green Credit Guidelines policy, this paper investigates the impact of green credit policies on corporate ESG performance from 2011 to 2019 using the double‐difference propensity score matching method (PSM‐DID) and the Heckman two‐stage method, using a sample of A‐share listed companies. It was found that the implementation of the Green Credit Guidelines effectively improved the ESG performance of firms in green credit‐restricted industries relative to non‐green credit‐restricted industries. It is further found that this is mainly due to the increased green focus of corporate executives, while the incremental effect of green credit policies on corporate ESG performance is further strengthened by the increased quality and quantity of corporate green technology innovation. Finally, heterogeneity analysis reveals that the boosting effect of green credit policy on ESG performance of enterprises in green credit‐restricted industries is more prominent in the sample of enterprises with more analyst attention, less financially developed regions and private ones. How to leverage the green credit policy dividend to enhance the ESG performance of enterprises, further refine, and improve the green credit policy to help enterprises' sustainable development are the most direct policy implications of this paper.