Environmental, Social and Governance (ESG) Performance and Green Innovation: An Investigation based on GMM

Abstract

Enhancing sustainability requires corporate initiatives to improve green technology; as a result, academics are interested in ways to encourage green innovation. The impact of environment, social, and governance (ESG) ratings on business green innovation in China is investigated in this study. This research examines the influence and mechanism of ESG ratings on green innovation using data of Chinese listed enterprises between 2013 and 2022. The researchers use Bloomberg ESG rating, CNRDS and CSMAR database for collection of data regarding all variables. The researchers conduct descriptive statistics, correlation matrix, and GMM (Generalized Method of Moments) model tests. According to the research, green innovation increase with ESG ratings. Additionally, empirical data suggests that the impact of ESG ratings on green innovation also encourages corporate joint green patents and the quality of green innovation. Businesses with superior ESG performance have been more overtly promoting their green innovation. ESG ratings are a significant factor in enhancing corporate green innovation, according to empirical data. The findings offer useful information to businesses, investors, and legislators on the important role that ESG ratings play in encouraging green innovation and offer plan of action to improve corporate performance.