ESG growth catalyst: China’s Central Bank collateral framework expansion
Xupei Wang, Liang Zhao, Wafa Ghardallou, Wafa Ghardallou, Wafa Ghardallou
TL;DR
China's central bank expanded collateral to include green bonds, which improved corporate ESG performance by easing financing and promoting green innovation.
Contribution
This study provides causal evidence that China’s EPCF policy enhances corporate ESG performance through financing and innovation.
Findings
EPCF improves ESG performance by about 0.02 units on average.
EPCF has a greater impact on non-heavy polluting enterprises.
The policy is more effective in marketized and coastal regions.
Abstract
Environmental, social, and governance (ESG) plays an important role in corporate sustainability. In June 2018, the People’s Bank of China (China’s central bank) decided to expand the scope of the Medium-Term Lending Facility (MLF) collateral to include green bonds issued by companies. This study investigates the impact of the PBOC’s policy of integrating green bonds into the collateral framework on corporate ESG performance, specifically by alleviating financing constraints and fostering green innovation. Specifically, this study takes the Expanded Pledge Framework Policy (EPCF) of the Central Bank as a quasi-natural experiment and uses the panel data of China’s A-share listed companies from 2014 to 2022 to investigate the causal relationship between EPCF and corporate ESG performance through the differential method (DID) and other methods. The results show that EPCF can improve the ESG…
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Taxonomy
TopicsEnergy, Environment, Economic Growth · Environmental Sustainability in Business · Sustainable Finance and Green Bonds