Climate policy uncertainty and corporate ESG performance: evidence from China

This study examines the impact of climate policy uncertainty (CPU) on corporate ESG performance. Using a sample of Chinese listed firms from 2010 to 2022, we find that the climate policy uncertainty significantly suppresses improvements in corporate ESG performance, and this conclusion remains valid after a series of robustness tests. Mechanism tests indicate that climate policy uncertainty negatively impacts corporate ESG performance through three channels: increasing managerial performance pressure, tightening financing constraints, and worsening information asymmetry. This negative effect is more pronounced for firms in the growth and decline stages, firms in the eastern region, and firms in non-heavy-polluting industries. Extension analysis also reveals that corporate reputation and analyst attention can effectively mitigate the adverse effects of policy uncertainty. Overall, this study uncovers the negative impact of climate policy uncertainty on corporate ESG performance and provides new empirical evidence for addressing the shocks of climate policy uncertainty and improving corporate ESG performance.