Can ESG rating event be an incentive to emission governance? ——Evidence from A-shares listed companies in China

Abstract Guiding firms to effectively launch emission mitigating and governing actions is a critical issue during the construction of ecological civilization, which is also an effective path to pave high-quality development. ESG rating system in China is gradually being improved, which is worth to study whether it could guide firms to focus more on environment governance. Therefore, this paper investigates that how ESG rating impacts on emission mitigation governing in the perspective of mechanisms testing and heterogeneity analysis. In this paper, the publication of ESG rating of Syn Tao Green Finance is used as a quasi-natural experiment to study the effect of rating events and rating results on carbon mitigation through a propensity score matching difference-in-difference model (PSM-DID). The study used the sample of 1546 A-share listed companies in Shanghai Stock Exchange and Shenzhen Stock Exchange in China from 2015 to 2022. Based on empirical study, the results have shown that emission mitigating driven by environmental information disclosure, enterprises innovation and financial constraints from ESG rating events. Meanwhile, the impacts of ESG rating on emission mitigating are heterogeneous in terms of industry sector, energy consumption and institutional ownership. Further analysis shows that emission mitigation governing exists economic effects, which could increase enterprises value. This paper explores the environmental and economic effects of ESG rating events on enterprises and provides policy orientation for the subsequent improvement of ESG rating system in China.