Against the background of green and sustainable development strategy, it is an effective way to carry out green innovation to cope with the increasing intensity of government environmental regulation for enterprises. Nevertheless, the regulatory role of ESG performance has been ignored. Based on panel data from Chinese listed companies from 2010 to 2019, this paper mainly studies whether the environmental regulation intensity and ESG performance have a substitution effect on the impact of green innovation by constructing a double fixed effect model. The empirical results showed that first, positive ESG performance is conducive to promoting green innovation. Second, there is a U-shaped relationship between the intensity of environmental regulation and high-quality green innovation, which reflects the effect of “offset before compensation”. With the increasing intensity of environmental regulation, high-quality green innovation tends to crowd out low-quality green innovation, which further improves the practical test of the “Porter Hypothesis”. Third, the positive ESG performance showed a negative regulatory effect between environmental regulation intensity and enterprise green innovation, which means that environmental regulation intensity and ESG performance have a substitution effect, and the effect is heterogeneous in different enterprises. This paper makes a beneficial exploration on how environmental regulation intensity and ESG performance affect enterprise green innovation, and demonstrates the regulatory role of ESG performance between environmental regulation intensity and green innovation, which reveals the impact of macro environmental policies on the green innovation behavior of micro subjects, and contributes to the further improvement of ESG concept and green innovation theory.

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Does the Environmental Regulation Intensity and ESG Performance Have a Substitution Effect on the Impact of Enterprise Green Innovation: Evidence from China

Digital transformation refers to highly thought-out social, manufacturing, and organizational transitions driven by digital revolutions and emerging technologies. On the other hand, energy is a critical pillar of the economic growth of the country. Meanwhile, global interest in environmental, social, and governance (ESG) investment is growing. The conventional investment paradigm is being phased out in favor of investments that prioritize environmental, social, and corporate responsibility. The energy sector is one of the most significantly affected. Presently, the field of digital transformation is limited in its analysis about the sustainability factors and is still controversial, especially in the energy business. This paper identifies an in-corporation factor in Industry 4.0, taking into account the effect on ESG. The research papers and the World Economic Forum reports were investigated and identified the correlation factor using machine learning to analyze their contents. We spotlighted the documents relevant to the energy industry and sustainable development. To quantify the model, confirmatory factor analysis (CFA) is proposed to generate a valid model, followed by path analysis with latent variables to evaluate the structural equation modeling (SEM). The result provides the conceptual model with impact factors and their correlations. The goodness of fit value is acceptable for the agreed-upon condition, as well as a descriptive that incorporates Industry 4.0 and ESG in terms of business, industry, and ESG in relation to the energy sector’s key issues.

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The Impact Factors of Industry 4.0 on ESG in the Energy Sector

Business models and investors should understand the meaning of ‘value’ from a different perspective if the ultimate goal is to achieve the sustainable development goals (SDGs). New business strategies for pursuing the SDGs and the aptitude to set up cleaner and more collaborative production systems must replace the traditional approaches tied to a value perception that is not coherent with the actual sustainability performance of companies. This outdated but still largely used value perception is often vague, abstract, and lacks more objective models and indicators to avoid misleading choices of investments in companies with low levels of sustainability. Using a mining company in Brazil as an example, this commentary letter aims to provide insights about the need for information rooted in science, considering biophysical perspectives under a systemic approach to fully understand the meaning of value behind companies' performance and support investments in those more sustainable ones. Parameters to quantitatively assess companies' sustainability are presented to start the discussions about how investors can make better choices when putting their money on those really more sustainable companies that, besides returning profits, will support the achievement of SDGs. 

Perceived value versus real value: Why can investors in sustainable companies fail in their mission?

Hotspots and trends of environmental, social and governance (ESG) research: A bibliometric analysis

Recent disasters have emphasized the need for further action to protect businesses and society from long-term sustainability threats. We believe that the crisis is hastening nascent ESG trends, and that the increased focus on a company’s environmental and social impact will last long after crises have passed. We refined three fundamental concepts that guide our thinking on investing based on environmental, social, and governance factors as our approach to sustainable investing has evolved. The ESG factor assessments are more of an inherent aspect of a sound investment process than a separate investment discipline. When ESG variables are considered, the focus is on long-term risk adjusted investment returns. Investors should choose the strategy that best matches with their goals and interests. ESG investing is not a simple yes or no answer. The research gap extracted from the previous studies is to determine the relationship among the influencing factors of ESG and its priority with their driving and dependence capabilities. We used an ISM Approach to uncover the interrelationships and influencing behavior among the elements for considering ESG in investment after conducting a thorough literature research and consulting with experts. Here interpretive structural modeling (ISM) was used to explore the links among such extracted factors and its interdependencies. There was also focus on the short-term and long-term factors to achieve our desired objective. Our research will assist businesses in attracting and obtaining finance. The results of this analysis will be helpful for leaders to understand the impact of ESG on the investment aspects of an organization.

Deepanjan Nanda

Papers

Factors Affecting ESG towards Impact on Investment: A Structural Approach