How does the green credit policy affect corporate ESG performance?

This study employed the difference-in-difference (DID) method to examine the impact of the 2012 Green Credit Guidelines (GCG) policy on enterprises' ESG performance. The findings demonstrated that, compared to enterprises in non-heavily polluted industries, highly polluting enterprises were compelled by the GCG policy to strategically enhance their environmental performance due to financial constraints and the effects of environmental disclosure. This affected the ESG performance. However, the effects on social and governance performance were not significantly different. Additionally, the GCG policy had a notably positive impact on the ESG performance of state-owned, large, and mature companies, while it negatively affected the ESG performance of companies in the growth phase. The effective implementation of the policy was supported by stringent environmental regulations and a high degree of financial development. Finally, based on the empirical results, this study offers recommendations for policy adjustments, raising enterprise awareness, and improving the external environment.