Quantity and quality: The impact of environmental, social, and governance (ESG) performance on corporate green innovation

Despite increasing attention to the economic consequences of environmental, social, and governance (ESG) performance, its impact on the quantity and quality of corporate green innovation (GI) remains underexplored. This study aims to reveal the impact and underlying mechanisms of ESG performance on corporate GI using a panel dataset of Chinese-listed enterprises. Our results show that ESG performance increases the quantity and quality of corporate GI by 2.72% and 3.20%, respectively. These significant positive effects are consistent across three ESG sub-ratings and a series of robustness tests, such as the instrumental variable (IV) test based on Confucian culture intensity. Mechanism analysis reveals that ESG performance positively affects corporate GI through the resource effect, governance effect, and innovation effect. Additionally, the GI impact of ESG performance is more pronounced in large, young, growing, and mature enterprises, enterprises in clean and low-carbon industries, and those located in key environmental protection (KEP) and two control zones (TCZ) cities. Our evidence provides insights into the informal drivers of corporate GI and the micro-GI effectiveness of ESG performance in emerging markets like China. [Display omitted] •We study the impact of ESG performance on the quantity and quality of corporate GI.•We employ a TWFE estimator and an IV design based on Confucian culture intensity.•ESG performance increases both the quantity and quality of corporate GI.•GI effects are driven by resource effect, governance effect, and innovation effect.•The heterogeneous effects are examined across enterprises, industries, and cities.