The Impact of ESG (Environmental, Social and Governance) Scores on Corporate Substantive and Strategic Green Innovation
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Abstract
In recent years, there has been a global increase in attention toward ESG (Environmental, Social, and Governance) policies, with different countries developing unique frameworks based on their national conditions and development stages. Concurrently, green innovation has emerged as a focal point for governments worldwide, leading to the establishment of green innovation policies as vital strategies for tackling climate change and promoting sustainable development. However, research on the effects of enterprise ESG scores—including E, S, and G scores—on substantive and strategic green innovation remains limited. This study empirically examines the impact of ESG scores on green innovation, substantive green innovation, and strategic green innovation in Chinese listed companies from 2007 to 2022. Findings reveal that a one standard deviation increase in ESG scores correlates with increases of approximately 38.24% in green innovation (gpat), 22.01% in substantive green innovation (ginpat), and 35.52% in strategic green innovation. ESG scores influence green innovation primarily through R&D expenditure, human capital, and information transparency. Additionally, the positive impact of ESG scores is amplified by higher asset-liability ratios, major shareholder influence, larger boards, and state ownership. Meanwhile, it was found that only the E-score significantly impacts green innovation, with effects evident within a 1 to 3-year lag, offering policy recommendations for enhancing corporate green innovation.
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