Does Chinese Capital Market Reward For Going Green?

With the gradual adjustment of the country's economic structure and development mode,accelerating the reform of the green economy system has risen to become a major national development strategy,the country's demand for investment and financing to support green industries are also increasing.Under the guidance of the concept of green sustainable development,investors in the capital market have gradually realized the importance of incorporating non-financial factors such as eco-environmental protection and social governance into investment decisions,in order to implement responsible investment and sustainable investment,and to promote the sustainable development of enterprises and society together.Therefore,studying how China's capital market evaluates the concept and practice of green development is of great significance for guiding and stimulating the flow of social capital to sustainable development and accelerating the transition of economy to green.Firstly,this paper introduces the evolution of the connotation of green investment,and expounds the selection basis of the sustainable development perspective,and then combs the main theories related to the research content of this paper,including the theory of environmental finance,enterprise sustainable development and capital market.Secondly,this paper combs the development status of China's green financial market in detail,and focuses on the analysis of the market performance of the green stock index,and initially shows the characteristics of the risk and return rate of the green stock index that China has built.Thirdly,based on the perspective of enterprise sustainable development,this paper uses fuzzy mathematics to evaluate green listed companies and selects 150 enterprises that meet the standards in green culture,environment,society and other aspects.Finally,using the selected green company data and basing on the Fama-French three-factor model,this paper constructs a green factor and green efficiency factor related to enterprise sustainable development,builds a new four-factor model,and applies new pricing model to verify the existence of green incentives in China's capital market.According to the empirical results of this paper,the following conclusions are drawn: Firstly,a green incentive four-factor model based on the enterprise sustainable development perspective is proposed.The newly constructed green-incentive four-factor model has a better fitting effect than the existing asset pricing model in the market.Secondly,China's stock market can respond to green ideas and practices.Green companies' stocks have higher yields than non-green companies,and this excess return of green stocks is just a compensation for the unique risks of green companies,that is,green incentive.Thirdly,listed companies with higher green efficiency can get positive incentives in China's stock market,but such incentives are rough,and the market still needs a more detailed green evaluation system.The main contribution of this paper is to construct a new green company rating system including five indicators of “culture,economy,society,environment and innovation” from the new perspective of enterprise sustainable development,and to screen out green companies with green connotation of the “sustainable competition and win-win sharing”.Under this premise,and based on the Fama-French three-factor model,this paper introduces a green factor to construct a new green incentive four-factor model.This model has great applicability in China's stock market and characterizes the risk and expected return of listed companies with green attributes well.What's more,through empirical analysis,this paper finds that green enterprises with strong sustainable development ability can obtain more risk premium in this green revolution.This finding provides new direct evidence for the limited research on green investment in China,and also provides a basis of decision-making for the government to formulate corresponding policies.