Environmental, Social and Governance ( <scp>ESG</scp> ) Rating Divergence and Corporate Carbon Risk: Evidence From China

ABSTRACT This study investigates the impact of environmental, social and governance (ESG) rating divergence on corporate carbon risk (CR) using a sample of Chinese A‐share listed companies from 2011 to 2020. As confirmed by a series of robustness checks, ESG rating divergence significantly exacerbates corporate CR. Moderating mechanism analysis reveals that increased corporate environmental attention and enhanced information transparency mitigate this adverse effect. Heterogeneity analysis shows that the impact of ESG rating divergence on CR is more pronounced in firms with focused operations, higher emissions, low‐quality audits, and limited political connections. Additional analysis indicates that corporate CR tends to rise with greater rating divergence among industry peers. This study offers recommendations for regulating ESG ratings, guiding enterprises to mitigate CR, and helping investors better account for rating divergence in their decision‐making.