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Do green policies catalyze green investment? Evidence from ESG investing developments in China

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  • Zhang, Xiaoke
  • Zhao, Xuankai
  • Qu, Linshan

Abstract

This study examines the heterogeneous performance of ESG investing in China before and after 2016, when the “Guidelines for Establishing a Green Financial System” was announced. In the portfolio analysis, high ESG portfolios earn significantly higher abnormal returns compared to low ESG portfolios in the post-2016 context, but this is not the case pre-2016. This outperformance is not closely related to common firm characteristics. Next, the stock analysis also shows that good ESG profiles predict higher future excess returns on average post-2016. The rising performance of good ESG stocks largely depends on equity cost advantage other than profitability improvement.

Suggested Citation

  • Zhang, Xiaoke & Zhao, Xuankai & Qu, Linshan, 2021. "Do green policies catalyze green investment? Evidence from ESG investing developments in China," Economics Letters, Elsevier, vol. 207(C).
    • Handle: RePEc:eee:ecolet:v:207:y:2021:i:c:s0165176521003050
    DOI: 10.1016/j.econlet.2021.110028
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    References listed on IDEAS

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    More about this item

    Keywords

    ESG investing; Portfolio analysis; Alpha; Chinese stock market; Green policy;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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