A Study on the Impact of Institutional Investors' Green Attention on ESG Ratings

Abstract

Against the backdrop of the global green transition and China's dual carbon strategy, the governance role of institutional investors has become increasingly prominent. Existing research predominantly focuses on their shareholding ratios while overlooking the impact of specific environmental governance behaviours. Drawing upon agency theory, resource dependence, and the attention-based perspective, this study constructs an ‘institutional investor green attention’ indicator using Shanghai and Shenzhen A-share companies from 2012 to 2023 as its sample. It empirically examines the influence mechanism of this indicator on ESG ratings. Results indicate that green attention conveyed through site research by institutional investors significantly elevates corporate ESG ratings, with findings holding up under multiple robustness tests. Mechanism analysis reveals that green attention indirectly drives ESG performance by enhancing ‘management environmental awareness,’ forming a transmission pathway of ‘external pressure – internal cognition – substantive response.’ This study reveals the micro-level mechanism through which institutional investors influence corporate sustainability from a behavioural perspective, offering significant insights for deepening active ownership practices and advancing capital markets' role in serving green development strategies.