Carbon reduction and corporate sustainability: Evidence from low-carbon city pilot policy

The enhancement of corporate environmental, social, and governance (ESG) performance represents a crucial aspect of the broader green transformation agenda. Using a DID design, this paper examines the impact of China's low-carbon city pilot (LCCP) policy on the corporate ESG performance. Our findings demonstrate that the construction of LCCP exerts a positive influence on corporate ESG performance in pilot regions, particularly in industries and areas with high carbon emission intensity. Channel analyses reveal that LCCP policy heightens the environmental concerns of local governments and the public. Furthermore, LCCP policy has a crowding out effect with firms located in the surrounding cities. This paper responds to the calls for the determinants of ESG and enriches the understanding of policy impacts on corporate sustainability practices.