How Fiscal and Monetary Coordination Policies Drive the Long-Term Transformation of Corporate ESG Performance: Taking China's Green Loan Subsidy Policy as an Example

Fiscal-Financial Coordination: Research on Policy Levers Driving Corporate ESG Transformation

Under the severe challenges of global climate change and sustainable development, corporate Environmental, Social, and Governance (ESG) performance is no longer just a reputation indicator but a key forward-looking metric for measuring long-term corporate value and resilience. However, transitioning from traditional operations to sustainable development often involves high capital-intensive green technology investments, which exposes companies to significant financing constraints.

This study shifts the focus from macro climate governance to micro-level corporate policy interventions, examining how the coordination between fiscal and financial policies acts as a powerful lever to guide corporate resources toward green development pathways. Taking the Chinese Green Loan Interest Subsidy (GLIS) policy as an example, we employ a quasi-natural experiment method to analyze how this policy effectively alleviates corporate financing pressure through fiscal means, thereby stimulating structural improvements in their ESG performance.

Capital Demand and Financing Bottlenecks Driven by ESG

Improving corporate ESG performance, especially in the environmental dimension, is essentially proactive risk management for the future and a strategic investment in green innovation. However, under resource constraints, the traditional financial system often encounters financing barriers due to unclear definitions of "green" and high risk assessment hurdles. This constitutes a core bottleneck in the ESG improvement path: how to convert environmental benefits into capital that can be effectively priced and obtained by the financial market.

Mechanism of Fiscal Intervention: From Subsidies to Green Innovation

The green loan interest subsidy policy implemented in China is a typical practice of fiscal-financial coordination. The core logic of this policy is that the government uses fiscal subsidies to reduce the actual interest burden on companies when obtaining green loans. This direct cost transfer has multiple effects in the financial market:

1. Financing Constraint Alleviation: Subsidies directly reduce corporate financing costs, making green technology upgrade projects, which were previously difficult to start due to high investment, more economically feasible. This effectively transforms fiscal resources into a "catalyst" for green capital. 2. Incentivizing Green Innovation: By lowering the financing threshold, the policy significantly enhances the willingness of companies to conduct R&D and technological upgrades. This not only accelerates the commercialization process of low-carbon technologies but also fundamentally improves the company's environmental performance, directly boosting its environmental ESG score. 3. Enhancing Governance Resilience: The implementation of the policy requires companies to meet certain environmental and social standards when securing funds, which implicitly raises the internal governance level of the company's environmental and social responsibilities, promoting the formulation of more forward-looking ESG strategies.

Our empirical results show that the GLIS policy has played a positive role in significantly improving the ESG performance of A-share listed companies in China, bringing considerable enhancements on ESG rating scales.Enhancing Governance Resilience: Policy implementation requires enterprises to meet certain environmental and social standards when obtaining funding, which implicitly improves the internal governance level of the enterprise's environmental and social responsibility and promotes the formulation of more forward-looking ESG strategies.

Our empirical results show that the GLIS policy has played a positive role in significantly improving the ESG performance of listed companies in China, bringing considerable enhancements at the ESG rating scale. This proves that in specific development stages and under specific policy environments, precise fiscal and financial coordination can effectively bridge the gaps caused by market failures and capital misallocation.

Heterogeneity Analysis: The Precision Drip Effect of Policy

The study further explored the heterogeneity of this synergistic effect. We found that the GLIS policy generated different marginal benefits for different types of enterprises. For example, non-state-owned enterprises, low-pollution enterprises, and industries subject to stricter local environmental supervision were most sensitive to policy responses in terms of the magnitude of improvement in ESG performance. This suggests that policy design should not adopt a one-size-fits-all approach but should be differentiated according to the risk characteristics and environmental sensitivity of the enterprises to achieve precise drip irrigation of fiscal resources.

Implications for Global Development Governance

The policy logic distilled from the Chinese experience holds profound implications for the green transition in the Global South and developing countries. Under the framework of global climate governance, the challenges faced by developing countries are not only the lack of decarbonization technology and infrastructure but also how to effectively mobilize existing fiscal resources and reshape financial incentive mechanisms. This demands that international cooperation should not merely be at the level of providing technical assistance but should be committed to building a "policy coupling mechanism" that can effectively connect macro-fiscal goals with micro-level corporate behavior.

Future research should further explore how to design more forward-looking fiscal tools against the backdrop of increasingly severe climate risks, to ensure that the green transition does not become a new driver exacerbating development imbalances, but rather becomes an endogenous driving force for inclusive growth.

Keywords: Green loan subsidy policy; Corporate ESG performance; Fiscal-financial coordination; Green technological innovation; Financing constraints; Policy heterogeneity; Green finance

Source: Can Fiscal and Financial Coordination Policies Enhance Corporate ESG Performance? A Quasi-Natural Experiment Based on China’s Green Loan Interest Subsidies Policy