Can crude oil futures market volatility motivate peer firms in competing ESG performance? An exploration of Shanghai International Energy Exchange

• Published in: Energy economics 2024-01, Vol.129, p.107240, Article 107240
• Main Authors: Zhang, Dongyang, Bai, Dingchuan, Chen, Xingyu
• Format: Article
• Language: English
• Subjects: Chinese crude oil futures; ESG performance; Peer firms; Price volatility
• ISSN: 0140-9883; 1873-6181
• DOI: 10.1016/j.eneco.2023.107240

While it is well-established that the financialization and international of Chinese crude oil markets are increasing with the listing of The Shanghai International Energy Exchange (INE), the sustainability performance effects remain poorly understood. Utilizing quarterly data of Chinese listed firms during Q1 2018 to Q1 2023, this paper tests the hypothesis that ESG becomes a preferred business strategy for firms facing challenges induced by fluctuations in crude oil futures prices. Our analysis reveals that, in response to crude oil market volatility, peer firms strategically enhance their ESG performance. This strategic shift is attributed to firms' efforts to counteract cost pressure, alleviate financial constraints, and navigate economic policy uncertainty stemming from crude oil futures market dynamics. Our findings are more evident in firms within heavy-polluting industries, non-energy industries, and those under non-state-owned ownership types. The implications of our research extend to firms across various sectors, highlighting the inherent economic and social benefits of adopting ESG practices to effectively respond to crude oil market volatility. [Display omitted] •The research investigates the relationship between crude oil futures prices volatility and peer firms' ESG performance.•Our analysis reveals that peer firms strategically enhance their ESG performance in response to crude oil market volatility.•The motivation effect is more pronounced in pollution-intensive firms, energy-intensive firms, and non-state-owned firms.•The implications of our research highlight the inherent economic and social benefits of adopting ESG practices.