Does shareholder engagement by ESG mutual funds promote green investment? Evidence from Chinese listed companies

The rapid expansion of Environmental, Social, and Governance (ESG) mutual funds within China's capital market has become a significant catalyst for corporate green transformation. This study examines the influence of ESG shareholder engagement on corporate green investment by analysing a panel dataset of China's A-share listed companies from 2010 to 2019. The results indicate that shareholder engagement by ESG-focused mutual funds markedly enhances green investment, with the most pronounced effects observed in state-owned enterprises and heavily polluting industries. These conclusions are robust across various tests. This research contributes to the literature by underscoring the pivotal role of capital markets in advancing corporate environmental responsibility and offers actionable insights for promoting green investments through targeted ESG shareholder engagement.