Corporate ESG Performance, Cost of Debt Financing and Environmental Investments

Objective: This study examines the relationship between corporate ESG performance, environmental protection investment (EPI), and debt financing cost. Methods: Using empirical data from Chinese A-share listed companies between 2008 and 2022, construct a two-way fixed-effects model to explore the impact of corporate ESG performance on EPI, with a particular focus on the mediating role of debt financing costs. Results: Corporate ESG performance significantly enhances EPI. In other words, strong ESG performance not only reflects corporate social responsibility but also acts as a driving force for promoting environmental investment and achieving green development. The lower the cost of debt financing, the more pronounced the positive effect of ESG performance on EPI. This suggests that superior ESG performance can reduce debt financing costs, thereby incentivizing enterprises to allocate more resources to environmental initiatives. Conclusion: Based on these findings, this paper proposes that enterprises enhance their ESG performance by improving corporate governance, strengthening environmental awareness, and actively engaging in environmental protection projects. Additionally, it recommends that investors incorporate ESG performance into their decision-making processes and encourages enterprises to continuously improve their environmental practices.