Under the ESG Dome of China

Abstract

Implementing ESG is crucial for China’s modernization journey and corporate sustainability. To deeply understand the current standing of ESG in China, this study leverages online data richness using text mining techniques, specifically Latent Dirichlet Allocation (LDA) and ego network analysis. LDA is utilized to identify prevalent discussion topics on ESG, while ego network analysis is applied to examine the relationships and influences among key stakeholders. The scientific aim of this research is to identify prevalent ESG discussion topics, examine the relationships and influences among stakeholders, and determine core ESG focus areas on Chinese society. The findings highlight popular discussion topics such as ESG investment, the ESG notion, green finance transformation, and ESG rating. These topics underscore China’s growing concern for environmental protection and social responsibility. The core discussion areas focus on sustainable development, company social responsibility, and eco-friendliness, framing harmonized progress across economic, social, and environmental realms. Interestingly, governance discourse is sparse; the reasons are analyzed. Through the analysis of online discussions on China’s ESG, this study aims to enhance policymakers’ and participants’ understanding of the true status of China’s ESG, being of practical significance for policy formulation and appropriate ESG strategies.

1. Introduction

Preliminary studies on environmental, social, and corporate governance (ESG) in China primarily focus on three areas, namely, performance, rating, and disclosure. The research questions predominantly investigate the impact of ESG activities on corporate performance [1,2,3,4,5], stock returns [6,7,8,9,10,11], and financing capability [12,13,14,15]. Additionally, a number of scholars believe that ESG can stimulate green innovation, which leads to sustainable corporate development [16,17,18,19,20]. Despite the explosive growth in ESG research, a prevalent uniformity exists in the current studies. Most scholars focus on the efficacy of ESG and overlook the macroscopic examination of the status of ESG in China. The primary reason for this trend is that, although ESG in the Chinese market is in its nascent phase [21], the sustainability features of ESG offer novel breakthroughs for participants across various fields in China, which is undergoing a structural transition. Therefore, demonstrating the effectiveness of ESG holds theoretical and practical significance. Specifically, regarding the theoretical foundation of ESG, stakeholder theory posits that the objective of ESG performance is to cater to the interests of stakeholders [22]. Conversely, signaling theory suggests that the disclosure of ESG information can alleviate market asymmetry and reduce uncertainty, which influence stock prices and liquidity [23,24,25]. Reputation theory indicates that companies with a commendable ESG reputation can lower production costs and enhance market competitiveness [26]. From a practical perspective, the ESG practices of corporations can enhance company value [27] and performance [28], spur innovation [29], mitigate information asymmetry [30,31], and elevate the efficiency of resource utilization [32], Alternatively, a robust ESG performance can offer corporations a competitive edge in fierce commercial landscapes [33], disseminate their corporate culture, and augment operational efficiency [34,35,36,37]. During the economic transition of the government, China has placed an increased emphasis on social and environmental issues. Enterprises, which are pivotal components of the socioeconomic fabric, are integral to sustainable development in China [16,18,23]. Additionally, with the spread of public education and increasing consumption capabilities, ESG extends from the investment and operation fronts to the consumer end. From the environment to politics and social issues, the general public and the labor force collectively harbor an expectation [38] or belief that businesses should strike a balance between the pursuit of profits and societal responsibility, which influences key areas such as society, the environment, and governance [6]. Institutional investors, asset managers, financial institutions, and other stakeholders increasingly rely on ESG reports and indices to evaluate long-term performance against peers [13,23,39]. Currently, all parties are passionately partaking in a green revolution in the belief of achieving sustainability through ESG, which has ignited a wave of academic inquiry. The necessity of conducting research on ESG is unquestionable. However, in the existing literature, research is limited to the examination of the effectiveness of ESG in China using quantitative methods. ESG development in China is still in its infancy; thus, the scale of ESG information disclosure and awareness of green investment are insufficient, and ESG standards lack an effective binding force [40,41]. As a result, current ESG standards are unable to improve the motivation of the market to participate in ESG activities [42]. As of the first half of 2020, less than 30% of listed companies have released ESG reports [42]. Moreover, the quality of ESG reports is frequently questioned, which leaves the market unsure about the credibility of ESG disclosure [43] due to the selective disclosure of environmental information by Chinese listed companies [44]. In addition, current ESG disclosures stem from enterprises mainly in the financial industry. As an industrial powerhouse, China’s secondary industry is the largest contributor to carbon emissions. Therefore, alternative research methodologies are imperative due to the limitations of quantitative methods in data collection and their inadequacy in exploring the current situation of ESG. Accordingly, this study aims to address the gaps in the existing literature by adopting a macroscopic examination of the status of ESG in China. Specifically, the scientific aims of this study can be explained in terms of three dimensions: Identify and analyze the prevalent discussion topics surrounding ESG in China using text mining techniques; examine the relationships and influences among key stakeholders through ego network analysis; and determine the core areas of ESG focus on Chinese society and assess their impact on the development of ESG practices.

To carry out the above research objectives, we focus on ESG-related Internet discourse. With the advancement of the Internet, more discussions are taking place online, which results in a vast amount of text data and offers a novel opportunity for better understanding societal phenomena [42]. Therefore, text analysis, as a popular research method, has attracted researchers to apply it to different fields.

Text analysis is a suitable technique based on the current situation of the analysis of large amounts of text data [45]. Specifically, it can effectively analyze unstructured data generated from online communication and enable the identification of meaningful topics from large amounts of text data [46]. Previously, network analysis mainly focused on the discussion of a single participant [42,47,48]. However, the development of ESG is driven by various stakeholders (e.g., enterprises, governments, the public, nongovernment organizations (NGOs), investment institutions, and researchers). Therefore, to provide an extensive analysis, the current study innovatively uses multiple text channels to collect data. We mainly collect data through Baidu (news, academic, web), China National Knowledge Infrastructure (CNKI; literature, journal, science, news, and books), Google (web and academic), Weibo, and People’s Daily Online. They represent discussion data by enterprises (Baidu web, Google web, and Weibo), government (Baidu News and People’s Daily Online), the public (Baidu web, Google web, and Weibo), NGOs (Baidu web, Google web, and Weibo), investment institutions (Baidu web, Google web, and Weibo), and researchers (Baidu Academic, CNKI, and Google academic) on the Internet.

In summary, this study uses the qualitative approach to explore the current situation of ESG in China in the context of emerging markets from a dome perspective. On this basis, this study continues to conduct an in-depth exploration of the core areas in which Chinese society pays attention to ESG and the forces that drive these areas for ESG development. This study utilizes network analysis to address these two issues. The research ideas and conclusions can enhance the understanding of policymakers and various stakeholders of the true status of ESG in China. On this basis, this study identifies targeted solutions, which will be of practical significance for the formulation of policies and appropriate ESG strategies for various stakeholders. In addition, it uses the qualitative method to extend the existing research on ESG to provide scholars with new ideas and directions for future research.

The significance of this study lies in method innovation. First, it adopts the qualitative approach and uses text mining technology to extract valuable information from large amounts of text data [48]. Conclusions are then drawn using Latent Dirichlet Allocation (LDA) and ego network analysis. The next significance pertains to idea innovation. Most of the existing research focuses on the effectiveness of ESG, but studies that assess the status of ESG in China from a macro perspective are few. In addition, this study innovatively explores the ESG fields to which the Chinese society is currently paying attention, to enable researchers to obtain a comprehensive and in-depth understanding of the current development of ESG in China. Therefore, this study aims to fill a gap in the existing research and provides diverse research directions for research on ESG in China. These findings are critical for policymakers and companies when taking proactive steps to promote the advancement and communication in ESG.

2. Literature Review: Progress of ESG Research in China

To obtain an intuitive understanding of the status of ESG research in China, the data were organized in tables. For example,

Table 1. Result of the literature review.

Reference	Period (China)	Methodology	Variables		Major Findings
			Dependent Variables	Major Independent Variables
Zhao et al. [1]	2016Q1–Q4	Panel regression	ESG performance	Return on capital employed (ROCE)	ESG performance → ROCE (+)
Liu et al. [3]	2016Q1–2020Q4	Qualitative comparative analysis	ESG	Corporate financial performance (CFP)	ESG → CFP (+/−)
Zhou et al. [4]	2014Q1–2018Q4	Mediation effect model	ESG performance	Market value of companies (MVOC)	ESG performance → MVOC (+)
Xie et al. [49]	2015Q1–Q4	Data envelopment analysis (DEA)	ESG	Corporate financial performance (CFP)	ESG → CFP (+)
He et al. [50]	2010Q1–2020Q4	Regression	ESG performance	Manager misconduct (MM)	ESG performance → MM (+)
Bai et al. [13]	2013Q1–2020Q4	Mediation effect model	ESG performance	Financing constraints (FC)	ESG performance → FC (+)
Chen et al. [6]	2010Q1–2020Q4	Business, family, and environment model	ESG performance	Cost of equity (COE)	ESG performance → COE (+)
Ge et al. [18]	2011Q1–2019Q4	Baseline model	ESG performance	Enterprises’ high-quality development (EHQD)	ESG performance → EHQD (+/−)
Chang et al. [51]	2013Q1–2019Q4	DEA/Banker–Charnes–Cooper model	ESG performance	Corporate financing efficiency (CFE)	ESG performance → CFE (+)
Ren et al. [17]	2011Q1–2020Q4	Fixed effects	Digital finance (DF)	ESG performance	DF → ESG performance (+)
Tang [52]	2015Q1–2020Q4	Panel regression	ESG performance	Corporate innovation (CI)	ESG performance → CI (+)
Li et al. [7]	2020Q1–Q4	Multiple regression	ESG performance	Stock Prices (SP)	ESG performance → SP (+)
Li et al. [12]	2014Q1–2019Q4	Logistic regression	ESG performance	Bond default rate (BDR)	ESG performance → BDR (+/−)
Wang and Sun [53]	2010Q1–2019Q4	Double fixed effect	ESG performance	Green innovation (GI)	ESG performance → GI (+)
Luo et al. [54]	2011Q1–2019Q4	Baseline regression	ESG rating	Trade credit financing (TCF)	ESG Ratings → TCF (+)
He et al. [55]	2010Q1–2020Q4	Baseline regression	ESG rating	Corporate risk taking (CRT)	ESG rating → CRT (+)
Zheng et al. [5]	2014Q1–2019Q4	Fixed effect	Green innovation (GI)	ESG Rating (CFP)	GI → ESG Ratings (+)GI → CFP (+)
Sun and Saat [56]	2009Q1–2021Q4	Difference-in-differences (DID)	Intelligent manufacturing (IM)	ESG performance	IM → ESG performance (+/−)
Chen et al. [6]	2014Q1–2020Q4	Difference-in-differences (DID)	Green financial reform (GFR)	ESG scores	GFR → ESG scores (+/−)
Zhang et al. [9]	2018Q1–2021Q4	Panel regression	ESG performance	Fund downside risk (FDR)	ESG performance → FDR (+/−)
Fang et al. [57]	2012Q1–2020Q4	Econometric	Enterprise digitization (ED)	ESG scores	ESG scores → ED (+/−)
Wang et al. [58]	2010Q1–2020Q4	Baseline regression	Multiple large shareholders (MLS)	ESG performance	MLS → ESG performance (−)
Tang [59]	2015Q1–2020Q4	Two-way fixed-effect multiple regression	ESG performance	Cost of equity (COE)	ESG performance → COE (+)
Chen and Xie [2]	2000Q1–2020Q4	Benchmark	ESG disclosure	ESG Rating (CFP)	ESG disclosure → CFP (+)
Meng et al. [60]	2011Q1–2020Q4	Difference-in-differences (DID)	ESG disclosure	Capital market performance (CMP)	ESG disclosure → CMP (+)
Yuan et al. [15]	2011Q1–2020Q4	Panel regression	ESG disclosure	Corporate financial irregularities (CFI)	ESG disclosure → CFI (+)
Yang et al. [38]	2015Q1–2020Q4	Modified Nelson–Siegel model	ESG disclosure	Corporate bond credit spreads (CBCS)	ESG disclosure → CBCS (+)
Lu et al. [61]	2010Q1–2018Q4	Baseline regression	Digital financial inclusion (DFI)	ESG disclosure	DFI → ESG disclosure (+)
Wang et al. [62]	2011Q1–2020Q4	Difference-in-differences (DID)	Multiple large shareholders (MLS)	ESG disclosure	MLS → ESG disclosure (+)
Cheng et al. [33]	2018Q1–2021Q4	Fixed-effects panel regression	ESG disclosure	Firm value (FV)	ESG disclosure → FV (+)
Chen et al. [63]	2011Q1–2019Q4	Panel regression	ESG disclosure	Technological innovation capability (TIC)	ESG disclosure → TIC (+)
Wang et al. [21]	2015Q1–2019Q4	Difference-in-differences (DID)	ESG disclosure	Corporate sustainable growth (CSG)	ESG disclosure → CSG (+)
Tan and Zhu [19]	2010Q1–2018Q4	Difference-in-differences (DID)	ESG rating	Green innovation (GI)	ESG rating → GI (+)
Liu and Lyu [20]	2009Q1–2020Q4	Multiple regression	ESG rating	Green innovation (GI)	ESG rating → GI (+)

indicates that the overall research on ESG emphasizes the positive role of ESG activities. However, as research progresses, an increasing number of scholars recently explore ESG’s effectiveness using three factors, namely, environment, society, and governance. Specifically, from the perspective of supporting ESG activities in producing positive effects, ESG factors influence the survival, sustainable development, and influence of enterprises. It is gradually becoming an important standard for evaluating corporate performance, guiding investment, and enhancing financing and risk management capabilities.

For example, when discussing ESG and financial performance, many scholars found that a positive ESG performance can improve financial performance [1,13,49,50,64,65]. In an analysis of the relationship between ESG performance, financial performance, and company market value, Zhou et al. [4] pointed out that an improvement in the ESG performance of listed companies exerts a positive effect on their market value, and financial performance evidently plays an intermediary role in this process. Chen et al. [6] explored the impact of ESG performance on the cost of equity (COE) of Chinese A-share listed companies from the multi-agency perspective and revealed that ESG performance exerts a significant impact on COE. Specifically, it helped significantly reduce a company’s COE capital. When examining the potential impact of digital inclusive finance, Lu et al. [61] elucidated that among companies faced with greater financing constraints, digital inclusive finance is particularly significant in promoting corporate ESG disclosure. In addition, Wang et al. [62] explored the interaction between multiple large shareholders (MLSs) and corporate ESG disclosure and proposed that companies adopting MLSs may exert regulatory impacts on ESG disclosure.

Regarding the relationship between ESG and innovation, certain scholars proposed that ESG performance significantly promotes the quantity and quality of corporate innovation and is mediated by alleviating financial constraints and agency costs [19,52,53]. Ren et al. [17] proposed that digital finance influences ESG performance by enhancing green innovation capability and external regulatory attention. Liu and Lyu [20] cited that ESG practices can help enterprises modernize technologies and products, enhance green innovation capabilities, and establish better relationships with employees, suppliers, and other stakeholders.

Alternatively, although the notion that ESG plays a positive role in China is generally acknowledged, the three areas, namely, environment, society, and corporate governance, do not exert the same impact. When exploring the interconnection between ESG and corporate financial performance (CFP), Liu et al. [3] emphasized that the social dimension plays a key role in positive financial performance results and that the relationship exhibits continued stability over time.

Ge et al. [18] proposed that environmental and social performance can promote the high-quality development of enterprises more than corporate governance performance can. Moreover, Li et al. [12] discussed the impact of ESG performance on its bond default rate and found that the bond default rate is positively related to the energy consumption of a company and negatively related to its focus on social responsibility, corporate governance, and financial performance. Regarding ESG disclosure, Chen et al. [66] proposed that the contribution of green finance reform to ESG scores is mainly driven by social responsibility scores. Digitalization enables companies to reduce agency costs and improve governance scores. Fang et al. [57] explored whether or not corporate digitalization improved ESG performance and mentioned that digitalization can help companies improve goodwill and further enhance social scores, but it has no significant impact on environment scores.

In summary, an increasing number of scholars endeavor to separately analyze the effectiveness of the three dimensions (i.e., ESG). However, a research gap continues to exist in the discussion of the status of ESG from the macro perspective and the areas of ESG to which current Chinese society pays attention. Based on this premise, we pose the following research questions:

• Q1: What are the hot issues around ESG thar are currently being discussed in China?
• Q2: What are the core areas of discussion on ESG in China? How do they influence the development of ESG?

3. Methodologies

This study used algorithms designed in Python to collect and conduct an in-depth analysis of text data on the Internet. We used ESG as the subject word to collect text data from 2016 to 2022. We derived documents through Baidu, CNKI, Google, Weibo, and People’s Daily Online. Except for duplicate documents, the collection results of each year from 2016 to 2022 were 893, 872, 942, 941, 961, 932, and 942, respectively. On this basis, the data collected in all years were merged, cleaned and preprocessed, then an LDA topic model was built to mine currently meaningful discussions about ESG. Furthermore, through ego network analysis, we explored the current core areas of concern for ESG in Chinese society and their specific influence on the development of ESG (See Figure 1).

3.1. Latent Dirichlet Allocation (LDA) Topic Model

LDA is a probabilistic topic model first proposed by Blei et al. [67]. This model is based on Bayesian probability and adopts a three-layer structure, namely, words, topics, and documents. As an unsupervised machine learning method, the core advantage of LDA is its ability to identify hidden topics in text datasets. In recent years, it has been widely used in various subfields of natural language processing [68,69,70]. This approach is considered appropriate, especially when addressing ESG-related qualitative and non-financial attributes [71]. Therefore, this study applies LDA to analyze hot topics related to ESG. The LDA model treats each article as a probabilistic mixture of latent topics, in which each topic is associated with a specific vocabulary set [72].

The topic modeling process of this study includes the following steps:

(1)

Data pre-processing. First, we cleaned the text collected on the topic word ESG and decomposed documents into sets of words or phrases. Moreover, we removed stop words that frequently appear across multiple documents but do not carry specific meanings. Next, we transformed the textual data into a format suitable for processing by the LDA model by constructing a Bag of Words model. The Bag of Words model represents each document as a word frequency vector, where each element represents the number of times a particular word appears in the document [72].

(2)

LDA model design. Genism is a topic modeling tool popular for its utility and scalability. In view of the intuitive nature of the Python language, this study opted for the Genism library based on Python to implement LDA. We used the constructed Bag of Words model as the input data, and designed and initialized the LDA model, specifying the number of topics to be extracted.

(3)

LDA model training. After completing the model design, we proceeded with training the LDA model. The purpose of model training is to adjust the topic–word distribution and document–topic distribution through multiple iterations, allowing the model to maximize the likelihood of word occurrences in the document set. Through training, the LDA model can uncover the hidden thematic structure within the documents [73].

(4)

LDA model visualization. To effectively illustrate the topic structure generated by the model, we employed an interactive LDA system that facilitates the parsing and presentation of the LDA output. LDA offers a comprehensive visual representation, which facilitates the identification of topic popularity and interrelationships among various topics, as highlighted by Sievert and Shirley [74]. In this visualization framework, circular symbols represent individual topics, in which the size of each symbol corresponds to the prevalence of a particular topic. Topics that exhibit high degrees of similarity are visually positioned in proximity and may even exhibit overlap, which indicates a need to reconsider the selected number of topics. To achieve optimal topic segmentation, we determined the ideal number of topics based on perplexity.

(5)

Model evaluation. To ensure the quality and validity of the trained LDA model, we evaluated it by calculating the perplexity. Perplexity is a standard measure of how well a model predicts a new set of documents. A lower perplexity indicates a better ability of the model to describe the data accurately [75]. By using the perplexity metric, we can select the optimal number of topics and model parameters, ensuring the effectiveness of the LDA model.

(6)

Document topic assignment and analysis. By further interpreting the output of the LDA model, we identify the most prominent topic label for each document. Specifically, the topic with the highest probability was considered the core topic of that document. We then further filtered out documents that can typically represent a specific topic to enable an in-depth understanding of key issues related to ESG.

By analyzing the content of these documents, we can identify the current hot topics related to ESG being discussed in China. Recognizing these hot topics helps in understanding the focal points of public and industry attention regarding ESG issues. This, in turn, provides valuable insights for policymaking and corporate strategy development.

3.2. Network Analysis

To explore the key research areas of ESG in China and their driving role in ESG development, this study employs the network analysis methodology. First, by identifying highly influential nodes based on coreness, hub, and eigenvector scores, the study determines the most impactful feature words discussed within the ESG network. The coreness score indicates the extent to which a node is located between the core and the periphery of a network [76,77]. Nodes with high coreness scores tend to be connected to many other nodes and occupy a central position in the network. Especially in the propagation of information, resources, or influence, these nodes can play a pivotal role. Alternatively, the hub score is primarily used to measure the way a node, which acts as a hub, connects to other significant nodes within the network. Moreover, in the Hyperlink-Induced Topic Search algorithm, the hub score frequently appears with the authority score. The hub score of a node represents its quality as a link source, while the authority score indicates the quality of a node as a link target. A higher hub score suggests that it is linked to many other nodes, and these nodes typically obtain high authority scores [78]. The hub score is mainly associated with the external connectivity of nodes within the network. Lastly, the eigenvector score is primarily used to measure the importance of a node within a network [79]. Furthermore, the significance of a node is determined not only by the number of nodes to which it directly connects but also by the importance of these nodes. Hence, high eigenvector scores may not necessarily indicate that it directly connects to the greatest number of nodes but that the nodes to which it directly connects are highly interconnected and significant.

In summary, the coreness score focuses on highly interconnected subsets of the network, the hub score emphasizes external links, and the eigenvector score concentrates on the quality and quantity of connections. These scores provide different perspectives for the analysis of the structure of a network and the significance and influence of nodes. Therefore, in the discussion on ESG, the coreness, hub, and eigenvector scores offer a quantified method for evaluating and identifying key nodes that are deemed influential within the ESG discourse. Additionally, to further explore the influence of these feature words in ESG discussions, ego network analysis offers the best analytical method.

Ego network analysis, as one of the most basic components of network structure, is a simple social network model that consists of an individual and all the nodes with social connections with the ego [80]. This mode of analysis primarily focuses on a central node (referred to as the ego or self) and the nodes directly connected to it (known as alters). The ego acts as the sole hub in its ego network and is connected to all its alters. Every connection between the ego and its alters is characterized by the strength of social ties [81,82,83,84,85,86]. Thus, the ego network model provides a local perspective, which helps in obtaining an in-depth understanding of the role and position of that specific node within the network [87].

The essence of ego network analysis is to understand the interaction between the central node and its neighbors. By calculating the number of connections between a specific node and its neighbors, its significance and influence within the network can be ascertained. Therefore, the status and role of these core nodes within the ESG network, as well as their impact on the development of ESG, can be determined using ego network analysis.

In conclusion, this study identifies influential feature words in ESG discussions based on top-ranking words based on coreness, hub, and eigenvector scores. We regard the role of feature words as areas on which contemporary Chinese society focuses regarding ESG. By conducting the ego network analysis on the feature words, we intend to discern the influence wielded by these words within ESG discussions. This aspect holds significant implications for future ESG policy formulation and for stakeholders in devising appropriate ESG strategies.

4. Results

4.1. Results of LDA

First, the study determined the optimal number of topics as four, based on perplexity (Appendix A; Figure 2; [88]. For more details, see Appendix B). In addition, the model was trained to obtain a topic–term matrix. To ensure independence and clarity between topics, the study eliminated ambiguous feature words that appeared in the topics. Ten words with high frequencies were selected as representatives of each topic, and the topic content was determined based on the semantic relationships of the feature words.

Table 2. Ten words with high frequencies per ESG-based topic.

ESG Investment	ESG Notion	Green Finance Transformation	ESG Rating
Investment	Listed company	Green finance	Credit rating
Green finance	Concept	Investment	Green management,
Environmental protection	Ecological civilization construction	Green fund	Information disclosure
Service	Forum	Market orientation	Listed company
Real economy	System	Green product	Risk
Green management	Investment	CSI	Strategy
Transformation	Working mechanism	Sustainability criteria	Investment
Environmental governance	Summit	New normal	Proactivity or positivity
Project	Consumption	Financial management product	Target
Green product	Supervision mechanism	Mengniu	Supervision mechanism

Note: CSI = China Securities Index; Mengniu = A specific brand name that refers to the Mengniu Dairy Company.

presents the results.

By combining the 10 most frequent words from each topic, the study identified four hot topics related to ESG, namely, ESG investment, ESG notion, green finance transformation, and ESG rating. In summary, ESG in China is currently in its early stages of development. Various stakeholders are still in the phase of understanding the ESG notion. Additionally, in terms of the specific implementation of ESG, ESG investment, green finance transformation, and ESG rating are the current trending topics of discussion.

4.1.1. ESG Investment

ESG investment promotes environmental protection and green management, because it considers environmental responsibility as one of the core factors of investment decisions. Investors tend to favor companies that adopt green management strategies and actively participate in environmental protection, which provides these businesses with the necessary financial support. Such a capital flow not only encourages more companies to implement environmental policies and projects, but also drives the research and promotion of green products. This tendency results in a dual return for businesses in terms of economic and socio-environmental benefits.

4.1.2. ESG Notion

With the intensification of climate issues and societal conflicts, various stakeholders (e.g., listed companies, governments, investment institutions, the public, and NGOs, among others) are gradually realizing the importance of ESG development and are actively promoting the practical implementation of the ESG conceptual framework. Enterprises that are represented by listed companies are keen to demonstrate their commitment to sustainable development and actively organize and participate in forums related to the construction of an ecological civilization. Moreover, with the shift in consumption structures and ideologies, consumers and investment institutions are increasingly inclined to support companies that adhere to ESG guidelines. Therefore, listed companies endeavor to incorporate ESG principles into their daily operations and investment decisions, building ESG systems and working mechanisms. Regulatory agencies also supervise this effort, to ensure that companies fulfill their ESG responsibilities.

4.1.3. Green Finance Transformation

Under the new normal, the market orientation is gradually leaning toward a sustainable and environment-friendly direction. Green finance transformation, through financial instruments such as green funds and financial management products, provides the necessary capital and mechanisms for achieving ESG objectives. It encourages enterprises, which are primarily listed companies (e.g., Mengniu), to develop and promote green products to meet the sustainability criteria requirements of the market. Meanwhile, investors and businesses can gain a clear understanding and evaluation of ESG performance by referencing sustainable investment indices, such as the China Securities Index, which further solidifies the pivotal role of green finance transformation in realizing economic and environmental values.

4.1.4. ESG Rating

An ESG rating, combined with credit rating, offers a comprehensive evaluation for listed companies. This evaluation model is based not solely on financial data but also on a company’s green management strategy and the transparency of its information disclosure. Therefore, many companies are adjusting their strategies and increasing their investment efforts to achieve high ESG ratings. Moreover, the enthusiasm of companies plays a pivotal role in this rating, which reflects their commitment to achieving sustainable goals. To ensure the fairness of ESG ratings, the government is also continuously improving the regulatory mechanism to guarantee a fair rating system.

In summary, using the four hot topics (i.e., ESG investment, ESG notion, green finance transformation, and ESG rating), ESG in China is evidently in the early stages of development. Different societal stakeholders are currently in the phase of understanding the ESG concept (ESG notion). Moreover, with the emergence of sustainable investment, various stakeholders require a more comprehensive theoretical framework for evaluating company performance, which may lead to widespread attention to the ESG notion. In terms of the practical implementation of ESG, the most effective paths and tools are found to be ESG investment, the ESG rating, and green finance transformation. The primary reason underlying this result is that ESG investment and ESG ratings can translate the ESG concept into tangible economic benefits within actual business environments. Meanwhile, green finance transformation provides the necessary funding and mechanisms for supporting the concrete implementation of ESG, which renders the realization of the economic value possible when advancing ESG objectives.

4.2. Ego Network Analysis

Through ego network analysis (

Table 3. Result of feature words.

Subject Word	ESG
Period	2016–2023.4
Recommended Core Node (Coreness Score)	Sustainable Development (0.436) Social Responsibility (0.426) Company (0.354) Eco-Friendly (0.286) Investment (0.224) Ideology (0.195)
Hub Node (Hub Score)	Sustainable Development (0.434), Company (0.355) Social Responsibility (0.285) Environmental Protection (0.285) Eco-Friendly (0.223)
Eigenvector Node (Eigenvector Score)	Social Responsibility (0.455) Eco-Friendly (0.425) Sustainable Development (0.388) Low Carbon (0.355) Company (0.285),
Feature Words	Sustainable development, social responsibility, company, and eco-friendly

), the study derived four feature words from the existing ESG texts: sustainable development, social responsibility, company, and eco-friendly. These four core feature words represent the current core areas of focus regarding ESG in Chinese society. To explore the influence of these four core areas on ESG development in China and to identify their intrinsic driving factors, ego network analysis provides the optimal solution.

By analyzing each feature word and the related terms to which they are strongly connected, we can elucidate their driving forces in discussions on ESG in China (See

Table 4. Result of ego network analysis.

Feature Words	Ego Network
Sustainable development
Social responsibility
Company
Eco-friendly

).

Sustainable development: Investment, low carbon, science and technology, and market orientation.

Sustainable development serves as the guiding principle for ESG evolution. It emphasizes that although businesses pursue economic gains, they should fully consider the long-term impacts on society and the environment. First, as Chinese society is becoming increasingly concerned about environmental issues and social contradictions, investment strategies are beginning to lean toward support for low-carbon and eco-friendly projects and businesses. This result is evidently a reflection of market orientation. The advancement of science and technology offers pivotal technological support and potential for low-carbon transition and green innovation. For instance, it aids in enhancing energy efficiency, reducing pollution, and optimizing resource utilization. Consequently, this dimension ensures that the production modes and products of enterprises are more aligned with the demands of sustainable development.

Against this background, sustainable development provides a macro framework for the ESG progression of businesses. Furthermore, it shifts the ESG concept from being merely an issue of ethics and social responsibility to becoming a core element of business strategy and market positioning.

Social responsibility: Environmental protection, investment, listed companies, credit rating, positiveness, and green finance.

Social responsibility is becoming a crucial criterion for gauging the sustainable development of listed companies, which exerts a profound impact on the advancement of ESG. Thus, in this development model, environmental protection is no longer a mere ethical choice but an influencing factor on the credit rating, investment appeal, and profitability of companies. Such a recognition propels the positiveness of companies toward ESG development, which prompts many listed companies to invest in green finance. In summary, social responsibility not only denotes a company’s commitment to society but also evolves into a key factor for securing a competitive edge in the global market.

Company: Investment, green management, market orientation, R&D, and evaluation.

In the context of globalization, noneconomic factors are progressively elevating their influence on global industrial distribution, and such a market orientation positively shifts companies from traditional business models to green management modes. Consequently, an increasing number of companies, as represented by listed firms, endeavor to enhance their corporate image and market competitiveness by promoting environmental protection ideologies, escalating green investments, and making significant contributions to green R&D. Simultaneously, to ensure the greater transparency and authority of corporate ESG information, credit rating agencies have initiated the evaluation of the ESG performance of companies, which further compels businesses to invest in ESG aspects. In summary, a company’s focus on ESG is not only a moral obligation but also an intimate link to its market position, investment returns, and global reputation.

Eco-friendly: Green finance, green management, green products, cooperation, environmental governance, and projects.

Eco-friendliness is a pivotal element in the advancement of ESG. Governments guide companies in environmental governance investments by implementing various eco-friendly strategies to help them achieve sustainable development. First, green finance provides the requisite financial support for businesses to achieve their ESG objectives, which enables the launch of various environmental projects. These projects typically involve practices related to green operations, such as the adoption of clean technologies and reduction of waste emissions, which necessitate financial backing and technological guidance from green finance. Furthermore, in today’s era, in which consumers demand sustainable products, the promotion and application of green products can assist businesses in quickly capturing the market and enhancing their competitive edge. Moreover, collaboration across sectors is becoming crucial for ensuring the broad application and promotion of practices related to environmental governance. Against this background, eco-friendly strategies not only offer concrete tactics for realizing ESG philosophies but also guide stakeholders in collaborative work toward a common environmental goal.

Therefore, sustainable development, social responsibility, company, and eco-friendly have emerged as core focal areas of ESG. The reason is that they are intricately linked to the long-term development strategy of the nation and the expectations of Chinese society. Together, they shape a synergy in businesses across the economic, social, and environmental dimensions. As primary economic entities, companies must also consider their social responsibilities while pursuing profit, by ensuring their activities exert a positive impact on society and the environment. Sustainable development offers an overarching direction for businesses, by emphasizing the ability to meet current needs without compromising the capability of future societies. Lastly, eco-friendly strategies guide companies toward the minimization of environmental damage due to their operations, which encourages the integration of ESG concepts into their core strategies and actions.

5. Discussion and Implication

This study delves deeply into the current status of ESG in China and its core discussion areas through the results from the LDA model and ego network analysis. Our research identifies several hot topics within the ESG landscape and provides unique insights into these topics within the specific context of China. Specifically, we pinpoint ESG investment, ESG concepts, green finance transformation, and ESG ratings as the four major focal points of ESG discussions in China. These findings align with the existing literature and further extend the previous research on multiple levels.

First, our results are consistent with the findings of Zhao et al. [1], which indicate a positive relationship between ESG performance and corporate financial performance. This further underscores the importance of ESG investment and ratings in the Chinese corporate landscape. Similarly, Liu et al. [3] highlighted that ESG performance can enhance corporate financial performance, particularly in the new energy sector, through qualitative comparative analysis. This study found that companies engaging in ESG practices not only improve their financial metrics but also gain a competitive edge in innovation and market positioning. These insights are consistent with our results, which show that green finance transformation and ESG investment are key topics in the current ESG discourse in China. Moreover, Zhou et al. [4] demonstrated that improvements in ESG performance positively influence the market value and financial performance of companies, indicating the mediating role of financial performance in this relationship. This is consistent with our findings that ESG investment and rating are not only popular topics but also essential for translating ESG concepts into tangible economic benefits. The positive impact on market value and financial performance underscores the practical significance of integrating ESG strategies into corporate governance. Chen et al. [6] explored the impact of ESG on the cost of equity capital in Chinese A-share listed companies, revealing that a strong ESG performance significantly reduces the cost of capital, thus enhancing the corporate valuation and investor appeal. Our study’s focus on green finance transformation aligns with Chen et al.’s findings, emphasizing the role of green finance in supporting sustainable corporate practices. Green finance provides the necessary funding mechanisms for companies to implement and maintain ESG initiatives, thereby fostering long-term sustainability and economic viability. Additionally, the sparse discourse on governance observed in our study is echoed by Liu and Lyu [20], who found that while the environmental and social dimensions of ESG are extensively discussed, governance issues often receive less attention, despite their long-term impact on corporate stability and performance. This trend suggests a need for further exploration and emphasis on governance in ESG discussions and practices in China. Governance is a critical component that ensures transparency, accountability, and ethical management, which are essential for sustainable corporate development. Our study also expands on the work of Wang et al. [21], who examined the relationship between multiple large shareholders and corporate ESG performance, highlighting the positive effects of diverse ownership structures on ESG disclosure and performance. This finding supports our observation that corporate governance, though less frequently discussed, plays a significant role in the effective implementation of ESG strategies.

By integrating these previous research findings, our study not only corroborates the existing literature but also extends it, by providing a comprehensive analysis of ESG discussions in the Chinese context. The alignment and discrepancies observed in comparison to prior studies offer a nuanced understanding of ESG’s evolving role in China’s corporate and policy landscape. Our findings highlight the importance of a balanced approach to ESG, incorporating environmental, social, and governance aspects to achieve holistic and sustainable development.

Based on the discussion of these findings, we propose a series of practical applications and policy recommendations to help stakeholders promote ESG development more effectively. The following section provides a detailed discussion of these applications and recommendations.

5.1. Understanding the Current ESG Landscape in China through Trending Topics

The currently hot topics on ESG are mainly concentrated in four areas, namely, ESG investment, the ESG notion, green finance transformation, and ESG rating. First, with emerging environmental crises, societal inequalities, and corporate governance disputes, various stakeholders require a comprehensive theoretical framework for assessing and guiding corporate behavior. ESG provides such a framework, to help various stakeholders reevaluate corporate performance from the three core dimensions, namely, environment, society, and governance. As a result, the ESG notion, as an emerging concept, has received widespread attention and discussion in society. Furthermore, ESG investment and rating are hot topics in the academic and public spheres, mainly due to the roles of ESG investment and rating as primary tools for translating ESG concepts into economic benefits. They help businesses and investors assess the performance of companies in ESG aspects through standardized and quantified methods. Investors can use these ratings to screen for companies with a strong ESG performance for investments. Typically, these companies are considered to possess long-term economic performance and risk management capabilities. Therefore, ESG ratings and investments, as effective means of quantifying the ESG concept, have become popular topics today.

Surprisingly, the results also highlighted green finance transformation as a hot topic in the ESG arena. Although ESG can bring long-term benefits to companies, it can exert financial pressure in the short term. Green finance provides funds and mechanisms for supporting sustainable projects, which promotes the practice and development of green technologies in enterprises. This scenario avoids the dilemma faced by companies who may abandon ESG initiatives due to short-term economic pressure, which gives green finance a central position in the ESG agenda.

Thus, although the development of ESG in China is still in its early stages, its significance cannot be overlooked. This aspect is primarily reflected in the substantial attention given by various stakeholders to environmental and social issues. Such a focus has fostered the refinement of ESG ratings, the growth of ESG investments, and the green transformation of the financial industry. Finally, it ensures that capital flows toward projects and companies with greater sustainability and social responsibility, which gradually achieves a harmonious development between economic benefits and environmental gains.

5.2. How Does the Core Discussion Area of ESG Drive Its Development?

After understanding the current state of ESG, this study identifies the four core domains that influence ESG development through ego network analysis, namely, sustainable development, company, social responsibility, and eco-friendly. In this manner, it further analyzes the influencing factors that drive ESG, for policy implications and to assist various stakeholders in formulating appropriate ESG strategies. First, sustainable development serves as the guiding philosophy of ESG evolution. It directs businesses to not only pursue economic benefits when establishing commercial strategies but also fully consider the long-term impacts on society and the environment. This holistic and comprehensive perspective provides the macro framework for ESG, which emphasizes that economic growth, environmental protection, and social welfare should lead to positive outcomes. Second, as economic entities, companies are the primary implementers of ESG activities through their possession of funds, resources, and decision-making power. Therefore, the decisions and actions of companies directly influence the actual state of the three ESG areas, which makes them a pivotal link in ESG development. Conversely, social responsibility underscores the obligation of companies to society and the environment. It demands that businesses contemplate the long-term effects on society and the environment in their decision-making processes, which ensures that their operations bring positive benefits to stakeholders, including employees, consumers, communities, and the environment. Lastly, being eco-friendly offers a more specific operational path for the environmental dimension within ESG. It guides companies to take proactive measures for reducing resource consumption and to adopt green technologies in an effort to realize genuine sustainable development.

5.3. Underestimation of the Importance of Governance

The study found that compared with the environment and social dimensions, discussions on governance are significantly weak. Several reasons underlie this trend. First, environmental and social issues are closely intertwined with the lives of the public, which makes them more prone to public discourse. For instance, topics such as global climate change, resource scarcity, social justice, and labor rights are more easily recognized due to their direct impacts and the need for improvement; thus, they gain more attention in public discussions. Second, issues related to governance frequently pertain to internalized ones such as the equity structure, responsibility allocation, and decision-making process of a company. External stakeholders cannot easily observe these issues. Moreover, governance issues typically determine the long-term stability of a company, and their impacts are typically indirect and become apparent only over an extended period. Hence, these internal management and decision-making governance issues may be more readily overlooked. Lastly, environmental and social issues are more susceptible to external intervention such as policy regulations, public appeals, and media coverage. However, governance emphasizes the autonomy of a company. Given the current lack of autonomy in the ESG domain among businesses, the focus and development of China in the governance dimension are limited. In addition, China’s centralized corporate management model, which combines government and enterprise, has exerted a certain impact on the development of the governance field. In China, certain enterprises, especially state-owned ones, are frequently closely integrated with the government. This combination can improve decision-making efficiency to a certain extent, because the decision-making process is more centralized and does not need to undergo multiple levels of review and approval. However, this decision-making model can lead to a lack of transparency in the decision-making process, which limits the participation of shareholders, employees, and other stakeholders. Therefore, although China’s centralized corporate management model, which combines government and enterprises, has improved decision-making efficiency to a certain extent, it may limit the diversity and transparency of the governance field in the long run.

In conclusion, although the governance dimension has relatively received less attention in ESG discussions in China, as the market and the public become increasingly aware of the long-term benefits of governance and recognize that neglecting it may limit its potential as a central driving force for ESG development, the significance of governance will receive increasing attention and emphasis.

5.4. Strategy for China ESG Development

This study underscores the importance of utilizing network analysis for research on ESG. First, the need emerges to further explore the interaction and synergy between popular ESG topics and core domains. For instance, investigating the role of the ESG concept within social responsibility, examining how businesses can intensify their ESG philosophy to fulfill their societal duties more effectively and exert a positive influence on society and the environment. Additionally, understanding how eco-friendly businesses benefit from green finance, and how they can achieve sustainable growth using tools such as ESG investment and ESG ratings, deserves further attention.

Given the current scarcity of discourse in the governance realm, further inquiries can investigate how to strike a balance between the three primary ESG dimensions. Doing so would aid enterprises in actualizing genuine sustainable development. Lastly, this study advises a combination of theoretical inferences with empirical data. For instance, case studies can validate how transitions to green finance promote firms in achieving breakthroughs in sustainability.

Understanding the present ESG development status and its core influencing factors, we recognize that China’s advancement in ESG has entered a new phase, possessing a foundational theoretical accumulation and practical experience. Thus, developing ESG is imperative. To effectively assist stakeholders in implementing ESG initiatives, this study offers specific strategic recommendations for both management practice and scientific research:

In terms of management practice, corporate managers should prioritize ESG investment and green financial instruments, assess the company’s ESG performance using standardized and quantitative methods, and optimize the company’s sustainable development strategy to enhance its market competitiveness and long-term economic performance. Additionally, companies should position sustainable development at the core of their corporate strategy, considering economic, social, and environmental factors comprehensively. This includes integrating social responsibility into corporate decision-making and prioritizing environmental protection measures and green technologies to achieve both environmental and economic benefits. Finally, companies should strengthen their governance structure, ensuring transparency and accountability to improve long-term stability and performance. Encouraging broad stakeholder participation and enhancing diversity and transparency in governance are also crucial.

Regarding scientific research, researchers can delve deeper into the specific mechanisms of ESG investment and green finance, as well as their long-term impact on corporate performance, thereby filling gaps in the existing research. They can investigate the implementation paths and effects of ESG in various companies and industries, understanding the specific roles and influences of companies in ESG initiatives. Additionally, researchers can explore how to enhance the role of governance in corporate ESG activities, especially under different corporate structures and management models. This includes evaluating the impact of governance structure on long-term corporate performance and providing empirical data support. By verifying the effectiveness and operability of different strategies through more empirical cases and data, researchers can offer theoretical support and empirical foundations for companies and policymakers.

Additionally, policymakers and regulatory authorities should establish comprehensive regulations related to ESG. Governments can stimulate businesses and investors to more actively champion ESG initiatives through fiscal subsidies or green finance policies. Moreover, by enhancing ESG information disclosure and rating rules, regulatory bodies can ensure market transparency, which promotes ESG investment. In investment decisions, investors should concurrently consider financial and ESG performance to circumvent potential risks. Especially when making investment choices, the specific practices of businesses in sustainable growth and societal responsibility should be considered by selecting those that genuinely offer long-term, consistent returns. Moreover, green consumption should be enhanced, which drives the market to prioritize ESG value and, thus, achieves collective societal and personal benefits.

6. Conclusions

This study identified the prevailing topics and core areas of discussion regarding ESG at present by utilizing a series of network analysis methods. First, the current hot topics of ESG discussion in China primarily encompass ESG investment, the ESG notion, green finance transformation, and ESG rating. Through these four subjects, we further analyzed the increasing concern in contemporary Chinese society about environmental protection and social responsibility. All stakeholders promote the development of the ESG concept in China through specific practical paths and assessment standards. In terms of the core areas of ESG discussion, the focus mainly lies on sustainable development, company, social responsibility, and eco-friendly. Taken together, these domains form the coordinated growth of enterprises in three major dimensions, namely, economy, society, and the environment. Additionally, this study revealed a notable absence of the governance sector in discussions within ESG topics and further deliberated on the reasons that underlie this phenomenon.

Based on the research findings, this study also offers several recommendations to further ESG development. These suggestions include improving ESG-related regulations, enhancing ESG investments, recognizing the significance of ESG performance in investment decision-making, the promotion of green consumption, and an understanding of the vital role of governance in achieving sustainable development.

The limitations and suggestions for future research are as follows. First, this study only analyzed the current state of ESG due to a lack of data across various years; thus, a discussion on the dynamic development of ESG is lacking. In the future, future studies can examine the development trends of ESG using a more comprehensive dataset. This aspect would be beneficial for understanding the evolution of ESG and predicting its future direction. Additionally, the current study only individually analyzed the hot topics and core discussion areas of ESG. Future studies could conduct an in-depth analysis into the interrelations among them, to provide specific decision-making recommendations. Lastly, new ESG-related topics may emerge, which necessitates continuous observation and research along with technological advancements and societal changes.