How Does the Green Factory Certification Policy Affect the ESG Performance of Enterprises? A Quasi-Natural Experiment from China

This article employs the green factory certification (GFC) policy as a quasi-natural experiment and empirically investigates the impact of the GFC on the Environmental, Social, and Governance (ESG) performance using data from A-share listed manufacturing companies in China between 2011 and 2022. We find that: first, the GFC can greatly improve ESG performance, and this finding remains robust after a series of robustness tests. Second, the mechanism analysis shows that GFC improves ESG performance by strengthening green innovation, increasing employment, and enhancing internal control. Third, the heterogeneity test reveals that the positive effect of the GFC on ESG performance is particularly pronounced for enterprises that are directly certified or have subsidiaries with repeated certification. The effect is also more pronounced among larger-sized firms and those with a higher proportion of shares held by long-term institutional investors.