Real green or fake green? Impact of green credit policy on corporate ESG performance

This study examines the effect of the 2012 introduction of the "Green Credit Guidelines" on the Environmental, Social, and Governance (ESG) performance of polluting enterprises listed on the Chinese A-share market from 2009 to 2019. Using a quasi-natural experiment framework, we employ a difference-in-differences model to evaluate the effectiveness of this green credit policy. Our analysis suggests that the green credit policy significantly hinders the ESG performance of polluting enterprises due to the "crowding out effect." Further investigation reveals that a notable decrease in green innovation, especially in its quality, impedes ESG improvements for these enterprises. Notably, the negative effects are more pronounced for non-state-owned enterprises. Our study provides valuable insights into the dual effects of the green credit policy, highlighting its potential to restrict financing options for polluting enterprises but crowd out resources allocated for environmental projects. To address these challenges, we propose practical strategies aimed at transforming the dual effects into dual benefits, optimizing both economic and environmental effects, and enhancing the overall effectiveness of the policy.

Yangjie Liao, Xiaokun Zhou