Does carbon control policy risk affect corporate ESG performance?

An important manifestation of corporate sustainability is environmental, social, and governance (ESG) perfor-mance. Based on a dataset of listed industrial firms in China from 2010 to 2019, carbon control policy risk negatively and significantly impacts corporate ESG performance, with financing constraints and bank loan costs as potential channels. This negative relationship is especially pronounced among non-state-owned firms, firms that are non-green innovation-sensitive, firms in carbon-sensitive industries, and firms located in regions with strict environmental regulations. It is also apparent in firms with higher institutional investor ownership and lower analyst coverage. Our findings can serve as possible action guidelines for firms aiming to address carbon control policy risks and actively invest in ESG activities.