Empirical research on the effect of environmental, social and governance (ESG) rating on green innovation of Chinese A-share listed companies

Purpose China’s economy is now focused on high-quality, green growth. The Environmental, Social and Governance (ESG) framework assesses corporate sustainability across ESG dimensions, balancing economic value with sustainability. Green innovation integrates economic performance with social and environmental responsibilities, aligning with ESG. However, the impact of ESG evaluation on promoting corporate green innovation has been rarely studied. Design/methodology/approach To deeply explore the relationship between ESG evaluation and corporate green innovation, this study uses a set of panel data from 732 Chinese A-share listed companies from 2014 to 2022 to run fixed-effect regressions. The one-year lagged data of green innovation is used to deal with potential endogeneity issue. Findings The study shows that ESG evaluation significantly enhances green innovation. Through heterogeneity analysis of equity nature (state-owned enterprises and non-state-owned enterprises), it is found that the effect of ESG evaluation on green innovation is more pronounced in state-owned enterprises. Further research indicates that ESG evaluation significantly promotes green innovation overall by guiding firms to increase their innovation investment. Originality/value To the best of the authors’ knowledge, this study is among the first to examine ESG evaluation’s impact on corporate green innovation in Chinese A-share companies, by exploring research and development investment as a mediator and corporate equity nature as a moderator, addressing key gaps in the literature.