Green credit policy’s influence on construction firm ESG performance: a difference in differences estimation

A firm’s participation in environmental, social and corporate governance (ESG) programs is a key determinant of its sustainability efforts. Based on the implementation of green credit policy, this article utilizes a Difference in Differences (DID) framework to study the influence of green credit policy on corporate ESG performance applying the data of Chinese A-share listed firms in the construction industry from 2009 to 2023 as a sample, and finds that: the green credit policy significantly promotes corporate ESG performance by imposing financing constraints and encouraging green technology innovation. The results remain robust after various tests. Further analysis reveals that the policy has a more substantial impact on enhancing ESG performance among smaller companies, those not audited by the Big 4, and non-state-owned firms. Based on these theoretical and empirical findings, the paper proposes suggestions and measures to enhance corporate ESG performance and reduce environmental risks to promote the comprehensive development of green finance.