Can ESG rating reduce corporate carbon emissions? – An empirical study from Chinese listed companies

As the most crucial microeconomic entities in a market economy, corporations play a decisive role in achieving the "dual carbon" objectives and driving green and low-carbon economic and social development. This paper utilizes data from Chinese A-share listed companies between 2010 and 2020 as its research sample. Using SynTao Green Finance ESG ratings as an exogenous shock, it constructs a staggered difference-in-differences model to empirically examine the impact and mechanisms of ESG ratings on corporate carbon emissions. The research findings indicate that ESG ratings have a significant inhibitory effect on corporate carbon emissions. This conclusion remains valid after undergoing parallel trend tests, placebo tests, instrumental variable regressions, and other robustness checks. Mechanism tests indicate that ESG ratings promote reducing corporate carbon emissions by alleviating corporate financing constraints and addressing agency problems. Analyst attention and media attention reinforce the inhibitory effect of ESG ratings on corporate carbon emissions. The inhibitory effect of ESG ratings on corporate carbon emissions is further pronounced in heavily polluting enterprises, with relatively consistent impacts observed between state-owned and non-state-owned enterprises. The research findings provide empirical evidence supporting government regulation of ESG development, businesses' involvement in ESG initiatives, and investors' pursuit of ESG investments to promote a reduction in corporate carbon emissions.