Exploiting The Impact Of ESG On Corporate Equity Capital

Recently,we are facing increasing environmental problems and global resource shortages,and incorporating the ESG(Environment,Social and Governance,that is,environmental,social and corporate governance)into investment decision process is considered to guide the development of sustainable economic activities.It is essential for the sustainable and healthy development of enterprises.Especially after the Responsible Investment Principles(PRI)was put forward in 2006,ESG has become the same important decision-making basis as financial reports,providing a new perspective for global investors to evaluate target companies.The real estate industry is a major driving force for the development.The ESG of real estate companies is not only related to the high-quality development of the real estate industry,but also related to the realization of the country’s goal of establishing a sound green and low-carbon circular development economic system.As an important driving force for economic development,real estate listed companies can gain investors’ recognition and preference through good ESG,occupy a superior position in financing,and reduce the cost of equity capital.This is a practical issue that both companies and regulators are concerned about.Therefore,this paper selects the real estate industry as the entry point,and conducts a theoretical analysis on the impact mechanism of ESG on the cost of equity capital based on stakeholder theory,information asymmetry theory,signal transmission theory and mathematical model derivation.Selecting the real estate A-share listed companies from 2010 to 2019 as the research sample,using multiple linear regression and neural network models to test the impact of corporate ESG on the cost of equity capital.This article takes "ESG performance-cost of equity capital" as the main line,and studies the following contents:(1)The effect of ESG disclosure of listed real estate companies on the cost of equity capital.The study found that: ESG information disclosure by listed real estate companies can help reduce the cost of equity capital.Disclosure of ESG information by enterprises can send signals of responsible enterprises to investors and reduce enterprise risks.(2)Study the effect of ESG performance of listed real estate companies on the cost of equity capital.The study found that: First,the ESG performance of real estate companies is significantly negatively correlated with the cost of equity capital,and this effect is more significant in small-scale enterprises and non-state-owned enterprises.Second,in the three dimensions of environment,society,and corporate governance,environment and corporate governance have bigger influences on the cost of equity capital,while the influence of social responsibility is relatively small.(3)Real estate companies’ active commitment to ESG responsibilities helps companies reduce business risks,and business risks play a part of the intermediary effect in the impact of ESG performance on the cost of equity capital.Actively assuming ESG responsibilities can reduce the business risks faced by investors.The cost of capital drops accordingly.Based on the research on the status quo of ESG of real estate companies and the relationship between ESG and the cost of equity capital,this article proposes countermeasures and recommendations for listed real estate companies,governments and investors:(1)Listed real estate companies should increase product and technological innovation and strengthen ESG information disclosure Establish good communication channels with stakeholders,and actively carry out ESG practices;(2)The government can provide assistance for ESG development in three aspects: technical level,legal system level,and incentive level,and adopt the “non-disclosure or explanation” market Principles,to encourage listed companies to actively disclose ESG performance;(3)Investors should enhance ESG concepts and incorporate ESG issues into the investment analysis and decision-making process.