Green investors and ESG ratings divergence

Green investors, as key participants in corporate governance, play a crucial role in addressing the ESG ratings divergence. This study investigates how green investors influence ESG ratings divergence using data from Chinese A-share listed firms from 2015 to 2023. The results show that green investors significantly reduce ESG ratings divergence by alleviating information asymmetry between firms and ESG rating agencies. The effect is more pronounced in non-SOEs, firms with lower environmental transparency and poorer governance environment, non-heavily polluting firms, especially the firms with lower air pollution, and firms with stricter environmental regulations. The findings highlight green investors' critical role in mitigating ESG ratings divergence and provide insights into their governance impact.