Climate policy uncertainty and ESG imbalance in China: a nonlinear investigation

This study examines the nonlinear relationship between climate policy uncertainty (CPU) and environmental, social, and governance (ESG) imbalance using a panel dataset of China’s A-share listed firms (2010–2023). The findings reveal a U-shaped relationship, indicating that under moderate uncertainty levels, firms engage in balanced ESG practices. However, under extreme uncertainty levels, firms reinforce opportunistic green behaviour by overinvesting in environmental performance metrics. The structural shift in ESG behaviour occurs post-2020; however, lagged estimates indicate that the effect of CPU on ESG imbalance is immediate rather than pervasive. The findings indicate that policy stability and transparency are requisites for addressing opportunistic ESG behaviour and promoting credible corporate sustainability policies.