Does environmental credit rating policy improve corporate ESG performance?

Abstract Environmental credit evaluation is essential for the establishment of an environmental financial system, but most studies have focused on the impact of green financial instruments such as green credit and green bonds, resulting in insufficient attention to this core aspect. This study examines the impact of environmental credit evaluation on firm ESG performance using a staggered difference‐in‐differences model based on China's environmental credit rating policy. By analyzing data from 2010 to 2020 on 1018 publicly listed firms in high‐pollution industries in China, this study finds that the implementation of the environmental credit rating policy significantly improves ESG performance. This positive impact is realized through enhancing environmental information transparency, strengthening external supervision, and alleviating financing constraints.