Low-carbon transition policy and the ESG quality of listed companies: evidence from low-carbon city pilots.

The strategic deployment of building a comprehensive socialist modern state has put forward new requirements for the green and low-carbon transformation of China's economic and social development. As the core subject of promoting this process, the incentive mechanism for enterprises to practice environmental protection and emission reduction and take on green responsibilities has become a hot topic of social and academic attention. This paper examined the impact of the implementation of the low-carbon city pilot policy on the quality of environmental, social and governance (ESG) of listed companies using the staggered difference-in-differences model based on microdata of Chinese listed companies from 2009 to 2021 as a representative low carbon transition policy and a quasi-natural experiment. The findings were as follows: 1 The low-carbon city pilot policy implemented in China since 2010 significantly improved the ESG quality of listed companies. The policy resulted in an average increase of 27.42% in the ESG index of listed companies in pilot cities. This result held after a series of robustness tests, including controlling for other policy interferences, propensity score matching, and placebo tests. 2 Under the influence of this policy, pressure from government regulation and public opinion supervision became a crucial driver for companies to autonomously enhance their ESG quality. 3 Green financial support helped alleviate corporate financing constraints and promoted green technological innovation, serving as an important mechanism for improving corporate ESG quality under the low-carbon transformation policy. Among these mechanisms, green technological innovation exhibited a trend toward both quantity and quality improvement. Innovation in energy-saving green technologies played a more significant role in enhancing corporate ESG quality in the context of the low-carbon city pilot policy. This study demonstrates that China's low-carbon city pilot policy not only promoted regional green and low-carbon transformation at the macro level but also encouraged enterprises to embrace the concept of low-carbon transformation and undertake responsibilities for sustainable and green development at the micro level. While enriching and supplementing the research on factors influencing corporate ESG quality, this study also provides theoretical and decision-making support for China's achievement of its 'dual carbon' goals. [ABSTRACT FROM AUTHOR]