Sustainable Institutional Investors and Green Innovation: Evidence from Chinese Listed Firms

This study examines the impact of sustainable institutional investors’ participation in the green innovation activities of firms. We hypothesize that institutional investors with sustainable preferences integrate long-term environmental goals into their investment strategies, consequently enhancing green innovation outputs. Using a dataset of Chinese A-share listed firms, we find a significant positive relationship between the presence of sustainable institutional investors and corporate green innovation outputs. Further analysis reveals that these investors promote the disclosure of environmental information and improve firms’ ESG performance, thereby providing financial support for green innovation initiatives. Our findings demonstrate that sustainable institutional investors “walk the talk” by fostering green innovation.