The Mutual Relationships Between ESG, Total Factor Productivity (TFP), and Energy Efficiency (EE) for Chinese Listed Firms

This study examines the mutual relationships among ESG performance, total factor productivity (TFP), and energy efficiency (EE) in a sample of Chinese A-share listed firms from 2010 to 2022. This study shows that ESG has a significant promotional effect on TFP. Reducing financing constraints and inefficient investment are among the mediating mechanisms, and the latter plays a greater role. Heterogeneity analyses suggest that state-owned enterprises (SOEs) and heavy-polluting enterprises (HPEs) should be consistently committed to ESG responsibility fulfillment. Formal environmental regulation (FER) can be complementary to ESG, but informal environmental regulation (IER) has the opposite effect. TFP was instead suppressed by the triple combined effect of ESG with these two. The results of the threshold effects of ESG and EE indicate that the positive impact on EE becomes more pronounced as ESG performance improves. However, ESG performance varies across subdimensions. As green technology research and development efficiency (GRDE) and green technology transformation efficiency (GTTE) improve, stronger ESG promotes EE. This threshold effect also exhibits heterogeneity with respect to the ownership structure. Moreover, there is bidirectional causality between EE and TFP, and EE has a stronger positive effect on TFP. These findings reveal the optimal paths and potential risks for moving toward sustainability for firms.