The catalysts of environmental policy: influence of investors on corporate green technology

Purpose The advancement of green technology innovation (GTI) is essential for achieving sustainable development and mitigating climate change. However, firms, particularly in developing economies, often lack the motivation to invest in green technologies. This study examines the role of institutional investors in shaping firms’ GTI under weak institutional environments. Design/methodology/approach Based on the data from green patents filed by Chinese publicly listed firms between 2010 and 2019 and leveraging the list of the first batch of cities included in the carbon emission trading (CET) pilot regulation, we test whether institutional investors can complement environmental regulation in promoting GTI and identify the boundary conditions under which this influence becomes more effective. Findings The study finds that while China’s CET pilot significantly promotes corporate GTI, this effect is contingent on investor characteristics. Firms with higher institutional investor shareholding, greater stability and more investor attention are substantially more likely to engage in GTI following the introduction of CET. In the absence of these conditions, the effectiveness of environmental regulation in weak institutional environments is markedly reduced. Originality/value This study introduces a conditional gatekeeper perspective to explain how institutional investors interact with environmental regulation, offering a more refined view of corporate green innovation in fragile institutional settings.