Mandatory ESG Information Disclosure Policy:"Safeguarding" the Development of Green Finance—An Evolutionary Game Model Based on Local Governments and Greenwashing Behavior of Heavily Polluting Enterprises

Authors

  • Xinyu Zou Beijing-Dublin College, Beijing University of Technology, Beijing, China Author
  • Zhimei Ouyang Beijing-Dublin College, Beijing University of Technology, Beijing, China Author
  • Ruoyan Dong Beijing-Dublin College, Beijing University of Technology, Beijing, China Author

DOI:

https://doi.org/10.71222/jfmv6h89

Keywords:

ESG information disclosure, greenwashing, green finance, evolutionary game model

Abstract

China is in the early stages of green finance development, with some listed companies engaging in greenwashing—misleading practices to appear environmentally friendly. To address this, the paper develops an evolutionary game model involving local governments and heavily polluting enterprises. It explores how mandatory ESG disclosure influences corporate strategy, finding that it can curb greenwashing when local governments enforce higher fines and higher-level governments provide stronger incentives. The case of Shendong Coal Group demonstrates the effectiveness of combining government penalties and incentives. A robust penalty system and high-level government incentives are essential for successful ESG disclosure policies to mitigate corporate greenwashing.

References

1. G. Xu, Y. Zhuo, and Y. Zhang, "Does ESG information disclosure enhance corporate value?," Financ. Account. Commun., vol. 4, pp. 33–37, 2022.

2. J. El-Hage, "Fixing ESG: Are mandatory ESG disclosures the solution to misleading ESG ratings?," Fordham J. Corp. Financ. Law, vol. 26, no. 2, pp. 359–390, 2021.

3. D. Zhang, "Green financial system regulation shock and greenwashing behaviors: Evidence from Chinese firms," Energy Econ., vol. 111, 106064, 2022.

4. Y. Peng, "Legal justification and rule construction of mandatory ESG information disclosure systems," Oriental Law, no. 4, pp. 152–164, 2023.

5. Z. Mo and B. Guo, "Analysis of ESG information disclosure greenwashing by listed companies," Coop. Econ. Technol., no. 6, pp. 125–127, 2024.

6. M. Zhang, H. Li, L. Xue, and W. Wang, "Using a three-sided dynamic game model to study regional cooperative governance of haze pollution in China from a government heterogeneity perspective," Sci. Total Environ., vol. 694, 133559, 2019, doi: 10.1016/j.scitotenv.2019.07.365.

7. H. Li and X. Zhao, "Investor attention and corporate ESG information disclosure greenwashing," Financ. Account. Commun., vol. 23, pp. 51–56, 2023, doi: 10.1111/beer.12585.

8. L. Mervelskemper and D. Streit, "Enhancing market valuation of ESG performance: Is integrated reporting keeping its prom-ise?," Bus. Strategy Environ., vol. 26, no. 4, pp. 536–549, 2017, doi: 10.1002/bse.1935.

9. Q. Yao, H. Hu, and Y. Feng, "A review and outlook on corporate greenwashing behavior," Ecol. Econ., vol. 38, no. 3, pp. 86–92, 2022, doi: 10.3846/jbem.2020.13225.

10. J. Aguilera-Caracuel and N. Ortiz-de-Mandojana, "An institutional approach," Organ. Environ., vol. 26, no. 4, pp. 365–385, 2013, doi: 10.1007/s11365-008-0081-4.

11. L. Leonidou, O. Kvasova, L. Leonidou, and S. Chari, “Business unethicality as an impediment to consumer trust: The moder-ating role of demographic and cultural characteristics,” J. Bus. Ethics, vol. 3, pp. 397–415, 2013, doi: 10.1007/s10551-012-1267-9.

12. M. A. Delmas and V. C. Burbano, “The drivers of greenwashing,” Calif. Manage. Rev., vol. 54, no. 1, pp. 64–87, 2011, doi: 10.1525/cmr.2011.54.1.64.

13. L. Gatti, M. Pizzetti, and P. Seele, “Green lies and their effect on intention to invest,” J. Bus. Res., vol. 127, pp. 228–240, 2021, doi: 10.1016/j.jbusres.2021.01.028.

14. X. Zheng, “Analysis and prospects of green bond financing effects for new energy enterprises under the dual carbon goals: A case study of BYD,” China Bus. Rev., no. 2, pp. 164–168, 2024.

15. Z. Li and H. Su, “Current status and institutional improvement of information disclosure under green bond green-washing,” Fujian Finance, no. 1, pp. 71–77, 2024, doi: 10.1016/j.ribaf.2024.102402.

16. F. Zhu, H. Fan, and H. Wu, “Does institutional investor shareholding promote corporate greenwashing? An empirical study based on social responsibility report disclosure by heavily polluting enterprises,” J. Financ. Econ. Res., no. 2, pp. 90–106, 2024, doi: 10.1016/j.iref.2024.103818.

17. Q. Chen and M. Li, “Economic policy uncertainty and corporate greenwashing behavior,” East China Econ. Manag., pp. 1–11, 2024, doi: 10.1108/IJBM-09-2024-0590.

18. R. Wang, “Government greenwashing: An analysis of the crisis of anomie in global climate governance,” Int. Pet. Econ., vol. 31, no. 12, pp. 1–8, 66, 2023, doi: 10.17065/huniibf.1249730.

19. K. Jiang, “ESG greenwashing, corporate value, and fund shareholding,” Exhib. Econ., no. 3, pp. 148–151, 2024.

20. Y. Liu, W. Li, L. Wang, and Q. Meng, “Why greenwashing occurs and what happens afterwards? A systematic literature review and future research agenda,” Environ. Sci. Pollut. Res., vol. 30, no. 56, pp. 118102–118116, 2023, doi: 10.1007/s11356-023-30571-z.

21. X. Yang, S. Liao, and R. Li, “The evolution of new ventures' behavioral strategies and the role played by governments in the green entrepreneurship context: An evolutionary game theory perspective,” Environ. Sci. Pollut. Res., vol. 28, no. 24, pp. 31479–31496, 2021, doi: 10.1007/s11356-021-12748-6.

Downloads

Published

25 July 2025

How to Cite

Zou, X., Ouyang, Z., & Dong, R. (2025). Mandatory ESG Information Disclosure Policy:"Safeguarding" the Development of Green Finance—An Evolutionary Game Model Based on Local Governments and Greenwashing Behavior of Heavily Polluting Enterprises. Pinnacle Academic Press Proceedings Series, 4, 170-188. https://doi.org/10.71222/jfmv6h89