Role of environmental, social, and governance (ESG) investment and natural capital stocks in achieving net-zero carbon emission

This study investigates the role of environmental, social, and governance (ESG) investment and natural capital stocks in achieving net-zero carbon emissions, focusing on the Chinese economy. This study uses the data from 2013 to 2022 and applies correlation analysis, quantile process estimation, quantile-factor augmented vector autoregressive, quantile dimension regression, and robustness analysis techniques. The results confirmed that ESG investment has a significant role in net-zero carbon emission and fosters natural capital stocks in the Chinese ecosystem. The results further established that natural capital stocks significantly benefit the Chinese ecosystem and reduce greenhouse gas emissions, CO₂ emission – gaseous fuel, CO₂ emission – solid fuel, and carbon intensity. Moreover, natural capital stocks have a significant role in achieving net-zero carbon emissions and it accelerates gross tree cover and green agricultural yield. The study is of great interest to corporations, Chinese banks, and the government in planning and achieving net-zero carbon emissions as per Prudential Financial regulation and accounting reporting systems. Achieving net-zero carbon emission is a process-based approach; therefore, the study recommends that policymakers customize investment mechanisms and natural capital accounting standards as per the territorial requirements and execute an ecological control system to make it sustainable.