The continued growth of the ESG (environment, society, and governance) investing trend has garnered great interest from both academics and professionals alike in the past decade. Nowadays, even developing countries like China are seeing a new wave of ESG investment opportunities. However, the research on ESG investing in emerging markets remains relatively lackluster, and fewer ESG studies concentrate on the topic of systematic risk. Therefore, this study wants to provide an analysis of the effect of ESG rating on the systematic risk of listed companies on the A-share stock market in China through the lens of a comparative study between high-tech manufacturing and conventional industries. Based on the fixed-effect model regression result on the quarterly data of 240 companies from 2018 to 2021, this paper discovers a negative correlation between ESG rating and the systematic risk a company is exposed to and a greater effect of ESG performance on systematic risk in high-tech manufacturing industries than conventional industries. Overall, this paper not only presents a new perspective on the correlation between ESG investing and the systematic risk a firm is exposed to but also serves as an inter-industry research that tackles a phenomenon specific to the Chinese capital market.
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Yusen Liang (2024) studied this question.
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