Environmental policy and sustainable development: An empirical study on carbon reduction among Chinese enterprises

Despite a huge body of literature revealing that the effect of environmental, social and governance (ESG) scores on a firms' financial performance and value, it lacks the empirical research on the nexus between corporate sustainable growth and ESG risk in the existing research. The paper aims to examine the nexus between ESG risk and corporate sustainable growth. This study utilizes a quantile regression approach to explore how ESG risk affects corporate sustainable growth (proxied by sustainable growth rate, SGR). The ordinary least squares estimation results confirm that ESG significantly negatively affects corporate sustainable growth. The quantile regression results reveal ESG risk has a significant negative effect on corporate sustainable growth in the upper quantiles of SGR, but not in the lower and median quantiles. The results show that the impact of ESG risk on the corporate sustainable growth is asymmetric and affected by the distribution of SGR. Furthermore, the research results identify that the negative relationship between ESG risk and corporate sustainable growth is particularly apparent for firms in environmentally sensitive industries. This study greatly contributes to existing literature, as with this detailed knowledge, managers can make decisions based on these associations and identify the most lucrative course of action.

Section: Sustainable Growth Ratementioning

confidence: 99%

“…Like the ESG scores, Morningstar's rating uses a 0-100 scale, where lower scores are superior. ESG risk is divided by five risk levels: negligible (0-10), low (10)(11)(12)(13)(14)(15)(16)(17)(18)(19)(20), medium (20)(21)(22)(23)(24)(25)(26)(27)(28)(29)(30), high (30)(31)(32)(33)(34)(35)(36)(37)(38)(39)(40), and severe (40-100) [19].…”

Section: Variablesmentioning

confidence: 99%

Environmental, Social, Governance Risk and Corporate Sustainable Growth Nexus: Quantile Regression Approach

Teng

Wang

et al. 2021

“…China has already put forward a policy of building an ecological civilization, and low-carbon development is also an inevitable choice, which will play an important role in alleviating environmental pressure and reversing the situation of continued deterioration of the ecological environment. Carbon reduction positively and significantly influences corporate sustainable development [12]. Carbon information disclosure is an important issue in the development of low-carbon, which has widely concerned stakeholders.…”

Section: Introductionmentioning

confidence: 99%

Carbon Information Disclosure, Marketization, and Cost of Equity Financing

Liu

Wang

et al. 2019

Using listed enterprises in China’s heavy pollution industry from 2009 to 2013, this study tests the relationship between marketization degree, carbon information disclosure, and the cost of equity financing. The results show that, regardless of marketization degree, the overall level of carbon information disclosure of listed enterprises in China’s heavy pollution industry is low. The content of carbon information disclosure is mainly non-financial carbon information, and the financial carbon information disclosure is very low. The cost of equity financing is different in areas with different marketization degrees, specifically speaking, the cost of equity financing is lower in regions with a high marketization degree than that of a low marketization degree. Carbon information disclosure, non-financial carbon information disclosure, and financial carbon information disclosure are negatively correlated with the cost of equity financing. The marketization degree has strengthened the negative correlation between carbon information disclosure, non-financial carbon information disclosure, financial carbon information disclosure, and the cost of equity financing, respectively.

“…Using large Italian firms, Cucchiella et al [39] found that cutting down carbon emissions has beneficial effects on the financial performance of a firm. This was supported by Yu and Tsai [47] who alluded that efforts by a firm to cut down its carbon emissions improve the longevity and sustainability of the firm. Lewandowski [48] also found a significant positive relationship between carbon emission reduction and financial performance.…”

Section: Carbon Emission Reduction and Financial Performancementioning

confidence: 96%

“…The results indicated that cutting down carbon emissions offers a business sustainable benefits. Yu and Tsai (2018) [ 47 ] concur and allude that efforts by a firm to cut down its carbon emissions improves its longevity and sustainability. This is because it is now crucial than ever to excel in environmental performance.…”

Section: Introductionmentioning

confidence: 99%

Environmental Sustainability Commitment and Financial Performance of Firms Listed on the Johannesburg Stock Exchange (JSE)

Dzomonda

Fatoki

2020

The importance of heeding the environmental sustainability commitment call cannot be underestimated. Laggards in terms of environmental sustainability commitment are likely to face fines and penalties as talks to tighten environmental legislation are now at an advanced stage globally. The current work assessed the link between environmental sustainability commitment and financial performance of firms listed on the Johannesburg Stock Exchange (JSE). The study was quantitative in nature with a case study research design. The longitudinal design was adopted where the researcher collected panel data from 2011–2018. The population of the study included all firms listed on the JSE Responsible Investment Index in South Africa. The sample constituted of 32 firms listed on the Financial Times Stock Exchange FTSE/JSE Responsible Investment Index in South Africa. The researchers employed the panel regression analysis model to analyze the data. Specifically, the Feasible Generalized Least Squares regression model was used in this study. Financial performance was treated as the dependent variable as measured by earnings per share and share price. The independent variables of the study included components of environmental sustainability such as carbon emission reduction and environmental compliance. Control variables such as firm size and liquidity were used in the study. The findings indicated that carbon emission reduction was positively and significantly related to earnings per share and share price. The findings further exhibited that environmental compliance was positively related to earnings per share and share price. It was concluded that firms can enhance their financial performance from environmental investment as all the hypotheses were supported. This study contributes practically towards shaping environmental policies and it also serves as motivation to listed companies that they can enhance both their profitability and market value from environmental investments.