Exploring the effect of environmental regulations on environmental, social, and governance practices in China

This study examines the impact of climate legislation on corporate social responsibility (CSR), with a particular focus on Environmental, Social, and Governance (ESG) criteria. We have compiled China data from 2010 to 2022 for our specified parameters, utilizing firms from the Difference-in-Differences (DID) methodology and quantiles via moments techniques (MMQR) for panel data analysis. The results indicate that climate legislation had a more significant impact following the 2015 Paris Agreement and the implementation of China’s New Environmental Protection Law. The findings also indicate that climate change legislation has a positive influence on ESG performance in Chinese firms, particularly within the lower and median quantiles, signifying initial strides towards enhanced sustainability practices. However, this study also reveals that the impact of such legislation diminishes in the upper quantile, suggesting that beyond a certain threshold, additional climate legislation fails to further improve ESG scores. The results have many applications for companies and governments.