The Influence of Environmental, Social and Governance (ESG) Ratings on Credit Ratings: A Case Study of Chinese Listed Companies

Abstract

Abstract

       This research, utilizing empirical data from firms listed on China's CSI 800 Index between 2019 and 2021, explicates the connection between Environmental, Social and Governance (ESG) performance and corporate credit ratings. Significant positive correlation was found, which is further influenced by the size, financial condition and nature of the enterprises. Larger enterprises are more inclined to achieve superior ESG ratings and credit rankings. A robust financial standing facilitates easier investment in ESG initiatives, leading to an enhancement in credit ratings. The ESG performance was found to have a more pronounced effect on the credit ratings of non-state entities, with state-owned firms leaning more toward governance. The obtained findings provide an insightful contribution to the improvement of ESG performance, enhance credit ratings, and foster sustainable development. These can help fill in the empirical research void in the domestic context, support policy formulation and advance the infrastructure for persistent ESG evaluation.

 Keywords: ESG (Environmental, Social, and Governance), corporate credit ratings, sustainable development