Improve carbon emission efficiency: What role does the ESG initiatives play?

Driven by the "dual carbon" goal, it is essential to investigate whether companies can enhance carbon emission efficiency by improving Environmental, Social, and Governance (ESG) performance. This study investigates the relationship between ESG ratings and carbon emission efficiency among Chinese A-share listed companies. The study reveals that a higher ESG rating significantly improves carbon efficiency. Mechanism studies indicate that the effect of ESG mainly comes from easing financing constraints, promoting green innovation, and strengthening supervision. Additionally, the study finds that the impact of ESG on carbon emission efficiency is more pronounced in non-heavy polluting and non-state-owned enterprises. Economic policy uncertainty diminishes the positive effects of ESG initiatives on carbon efficiency, while enhanced governmental concerns to environmental significantly bolsters these impacts. This paper offers empirical insights that can inform adjustment of policies concerning ESG performance and carbon emission.