Corporate sustainability: the role of environmental taxes in ESG performance

Exploring the influence of environmental taxes on ESG performance is crucial for fostering enterprise sustainability. This study presents an investigation of the influence of environmental taxation on corporate ESG performance by utilizing listed companies on the Chinese A-share market with notable pollution levels as the research sample from 2009 to 2021. Employing the two-way fixed effects model methodology, an empirical analysis is conducted. The results reveal the following: (1) Enforcing environmental taxes can bolster the ESG performance of enterprises, with a more pronounced effect observed in state-owned and large enterprises; (2) Environmental taxes contribute to improving a firm's ESG performance by fostering green innovation and attracting media attention; (3) The internal environment and equity balance of enterprises can amplify the positive impact of environmental taxes on enterprise ESG. These findings offer valuable insights into how corporate environmental taxes enhance ESG performance and foster sustainable development. Moreover, this study adds to the current body of ESG literature and provides valuable insights for government policymakers in adjusting environmental tax policies and corporate governance measures.