Does ESG performance promote ‘New Quality Productive Forces’ in China? From efficiency driven and innovation-driven perspectives

With the rapid advancement of corporate Environmental, Social, and Governance (ESG) ratings, it is crucial to examine their effects on China’s pursuit of ‘New Quality Productive Forces’ from both efficiency-driven and innovation-driven perspectives. By utilizing panel data from Chinese listed firms from 2009 to 2023, our empirical results indicate that ESG ratings significantly enhance both total factor productivity (TFP) and the quantity and quality of green innovation, with the effect on green innovation being more pronounced. This positive effect is achieved through multiple
mechanisms, including the alleviation of financing constraints and the mitigation of principal- agent issues. Additionally, media attention serves as a positive moderating factor, strengthening the beneficial impact of ESG ratings on both TFP and green innovation. We also explore the impact of ESG ratings on corporate greenwashing and find that higher ESG ratings substantially lower the likelihood of greenwashing. Heterogeneity analyses reveal that the impact of ESG ratings varies across different regional policy environments, industry sectors, and firm characteristics. Notably, the positive effects on TFP and green innovation are more pronounced in regions with Pilot Free Trade Zones (PFTZs) and firms in technology-intensive and capital-intensive sectors, with the magnitude of these effects also being influenced by ownership structure.