Impact of AI Pilot Zones on Corporate ESG Performance: Evidence from China

This study examines the impact of place-based artificial intelligence (AI) policies on corporate environmental, social, and governance (ESG) performance. Using the staggered rollout of China’s National New Generation AI Pilot Zones as a quasi-natural experiment, we employ a difference-in-differences design on A-share listed firms from 2012 to 2023. Our results show that the establishment of AI Pilot Zones significantly improves firms' ESG scores. Mechanism analysis reveals that this policy effect operates through three primary channels: (i) a financial-support channel characterized by increased government subsidies and reduced tax burdens; (ii) a technological-empowerment channel that enhances data utilization and smart investment; and (iii) an organizational-empowerment channel that fosters green managerial innovation and increases the stock of high-skilled human capital. Heterogeneity tests indicate that the ESG-enhancing effect is more pronounced among state-owned enterprises, firms with green investors, and those located in superior business environments, while a "ceiling effect" is observed for firms already certified for green manufacturing. Furthermore, we document significant spatial spillover effects, where ESG improvements diffuse to non-pilot cities through inter-city economic and trade linkages. These findings suggest that AI-related place-based policies function as vital institutional catalysts for corporate sustainability. • AI Pilot Zones significantly boost the ESG performance of listed companies. • Fiscal incentives like subsidies and tax relief drive corporate sustainability. • AI policies empower firms through better data use and smarter investment. • Green management and high-skilled talent facilitate organizational ESG gains. • ESG benefits extend to non-pilot cities via inter-city economic linkages.