The Impact of ESG Ratings on Total Factor Productivity: Based on Empirical Analyses and Case Studies

This study investigates the impact of Environmental, Social, and Governance (ESG) ratings on Total Factor Productivity (TFP) in China’s pollution-intensive industries, highlighting the significance of sustainable development amid economic growth and environmental challenges. Using panel data from A-share listed companies from 2012 to 2022, the study examines the direct effects of ESG ratings on TFP while exploring the mediating roles of financial constraints (FC) and research and development (R&D). Furthermore, it assesses the moderating effect of state-owned enterprises (SOEs) in strengthening the ESG-TFP relationship. To facilitate comparative analysis under institutional diversity, the study incorporates case studies from South Korea, a country that has made notable progress in ESG practices under a different governance and regulatory environment. The findings of empirical test reveal a significant positive relationship between ESG ratings and TFP, with SOEs exhibiting stronger effects due to institutional advantages and policy alignment. Financial constraints and R&D are identified as key mediators, illustrating the mechanisms through which ESG initiatives enhance productivity. This research contributes to the literature by integrating ESG and productivity analyses within pollution-intensive industries, offering novel insights into the role of SOEs in driving green transformation and sustainable development. The results also provide practical implications for policymakers and industry stakeholders, emphasizing the importance of ESG-driven strategies to promote high-quality economic growth in Korea and China.