The role of sustainable-oriented investor penetration in enhancing corporate carbon and energy efficiency: Evidence from China

The current research utilizes a firm-level panel dataset of Chinese A-share listed companies from 2008 to 2020 to investigate how sustainable-oriented investor penetration (SIP) affects corporate carbon emission efficiency (CCEE). To describe the nature and degree of green investor participation, two dimensions of SIP are examined, namely, entry (SIPdum) and intensity (SIPnum). The empirical results indicate that SIP has a significant positive impact on carbon efficiency, be reflected in environmental, social, and governance (ESG) performance. Findings are also strong between specifications and endogeneity. Also, the study highlights that green investors can achieve ecological and economic goals simultaneously by enhancing financial performance, in addition to increasing environmental benefits. The data are consistent with resource dependence theory and stakeholder theory, which propose that sustainability-oriented capital involvement leads to long-term value creation. This research advances the literature by offering micro-level evidence from an emerging market and by proposing policy recommendations to scale up green finance to support China’s low-carbon transition. • SIP improves corporate carbon emission efficiency in Chinese firms. • Both SIP entry and intensity positively affect green investor impact. • ESG performance mediates the link between SIP and carbon efficiency. • Results hold under robustness checks and endogeneity treatments. • Green investors achieve both ecological and economic objectives.