Climate Policy Uncertainty and Corporate Sustainable Performance: An Empirical Study Based on Chinese Listed Companies

Abstract

With the global climate governance development, climate policy uncertainty has shifted as one of the most important institutional factors influencing corporate sustainability. However, existing studies have shown mixed evidence regarding the effects of governance and have paid little attention to the boundary conditions that climate policy uncertainty shapes corporate sustainability. The relationship between climate policy uncertainty and corporate sustainability performance will be investigated in this study using a sample of Chinese A-share listed firms from 2016 to 2025, which is proxy measured through ESG (environmental, social, and governance) performance scores. We utilized a two-way fixed-effects model, including various robustness, endogeneity, and heterogeneity tests. The empirical findings suggest that the uncertainty of climate policies boosts corporate sustainability. Moreover, this positive impact is particularly significant for enterprises situated in southern China, firms engaged in sectors benefitting from industrial policy support and large enterprises. According to this finding, climate policy uncertainty’s governance impact is predicated on the interaction of external institutional settings and firms’ organizational features. By offering a more comprehensive clarification of how climate policy uncertainty affects governance, this study contributes to the literature on corporate sustainability and climate policy uncertainty and advances our knowledge of firms’ sustainability responses in the context of policy uncertainty.