my city rajkot essay

Essay on My City Rajkot For Kids & Students

Vadodara, Ahmedabad, and Surat, Rajkot becomes the 4th largest city in Gujarat and is the 35th largest urban amassment in the country. Not only is that it the 22nd fastest developing city in the world. The city is on the banks of the river Nyari and Aji. The city is the 18th cleanest city in the country. It is the administrative headquarters of the Rajkot district.

Rajkot which is located almost in the middle of Saurashtra has a tropical weight & dry climate. So, it a place for hot dry summers from March to June and enjoys the wet monsoon from June to October. From November to February the weather is mild with low humidity. The hot is tedious as the temperature reaches 40-45 degree Celsius. Winter is no doubt pleasant.

Rajkot is a multicultural and multilingual city and the common languages are English, Gujarati, Sindhi, Hindi, Malayalam, Tamil and Marathi. But among them, the most popular are Hindi, English, Gujarati, and Urdu. People of Rajkot is called Kathiyawadi as the city is a part of Kathiyawadi. The city is also known as the colorful city or the ‘Rangiloo Rajkot’. This is the city of painting. So, it is also called “Chitranagri”.

The inhabitants of Rajkot are pure vegetarians and they are against any type of hunting. The women here love to wear ornaments for any occasion like marriages, functions or any festival and the jewelry they like pendants, large chains, and other heavy gold jewelry. The women change their raiment with the change in season as well as festivals. The ladies wear Gujarati type sari and the men wear the flowing Kurtas, shirts, and trousers.

This is a place for historical landmarks which makes the city as a spot for tourists’ destination. The interesting places to visit here are Connaught Hall, Lang Library,Mohandas Gandhi High School,Rotary Midtown Library, Saurashtra Cricket Association Stadium, Rotary Dolls Museum,Kaba Gandhi No Delo and much more.

Santosh Kumar

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Financial technology and the future of banking

• Daniel Broby   ORCID: orcid.org/0000-0001-5482-0766 1  

Financial Innovation volume  7 , Article number:  47 ( 2021 ) Cite this article

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This paper presents an analytical framework that describes the business model of banks. It draws on the classical theory of banking and the literature on digital transformation. It provides an explanation for existing trends and, by extending the theory of the banking firm, it illustrates how financial intermediation will be impacted by innovative financial technology applications. It further reviews the options that established banks will have to consider in order to mitigate the threat to their profitability. Deposit taking and lending are considered in the context of the challenge made from shadow banking and the all-digital banks. The paper contributes to an understanding of the future of banking, providing a framework for scholarly empirical investigation. In the discussion, four possible strategies are proposed for market participants, (1) customer retention, (2) customer acquisition, (3) banking as a service and (4) social media payment platforms. It is concluded that, in an increasingly digital world, trust will remain at the core of banking. That said, liquidity transformation will still have an important role to play. The nature of banking and financial services, however, will change dramatically.

Introduction

The bank of the future will have several different manifestations. This paper extends theory to explain the impact of financial technology and the Internet on the nature of banking. It provides an analytical framework for academic investigation, highlighting the trends that are shaping scholarly research into these dynamics. To do this, it re-examines the nature of financial intermediation and transactions. It explains how digital banking will be structurally, as well as physically, different from the banks described in the literature to date. It does this by extending the contribution of Klein ( 1971 ), on the theory of the banking firm. It presents suggested strategies for incumbent, and challenger banks, and how banking as a service and social media payment will reshape the competitive landscape.

The banking industry has been evolving since Banca Monte dei Paschi di Siena opened its doors in 1472. Its leveraged business model has proved very scalable over time, but it is now facing new challenges. Firstly, its book to capital ratios, as documented by Berger et al ( 1995 ), have been consistently falling since 1840. This trend continues as competition has increased. In the past decade, the industry has experienced declines in profitability as measured by return on tangible equity. This is partly the result of falling leverage and fee income and partly due to the net interest margin (connected to traditional lending activity). These trends accelerated following the 2008 financial crisis. At the same time, technology has made banks more competitive. Advances in digital technology are changing the very nature of banking. Banks are now distributing services via mobile technology. A prolonged period of very low interest rates is also having an impact. To sustain their profitability, Brei et al. ( 2020 ) note that many banks have increased their emphasis on fee-generating services.

As Fama ( 1980 ) explains, a bank is an intermediary. The Internet is, however, changing the way financial service providers conduct their role. It is fundamentally changing the nature of the banking. This in turn is changing the nature of banking services, and the way those services are delivered. As a consequence, in order to compete in the changing digital landscape, banks have to adapt. The banks of the future, both incumbents and challengers, need to address liquidity transformation, data, trust, competition, and the digitalization of financial services. Against this backdrop, incumbent banks are focused on reinventing themselves. The challenger banks are, however, starting with a blank canvas. The research questions that these dynamics pose need to be investigated within the context of the theory of banking, hence the need to revise the existing analytical framework.

Banks perform payment and transfer functions for an economy. The Internet can now facilitate and even perform these functions. It is changing the way that transactions are recorded on ledgers and is facilitating both public and private digital currencies. In the past, banks operated in a world of information asymmetry between themselves and their borrowers (clients), but this is changing. This differential gave one bank an advantage over another due to its knowledge about its clients. The digital transformation that financial technology brings reduces this advantage, as this information can be digitally analyzed.

Even the nature of deposits is being transformed. Banks in the future will have to accept deposits and process transactions made in digital form, either Central Bank Digital Currencies (CBDC) or cryptocurrencies. This presents a number of issues: (1) it changes the way financial services will be delivered, (2) it requires a discussion on resilience, security and competition in payments, (3) it provides a building block for better cross border money transfers and (4) it raises the question of private and public issuance of money. Braggion et al ( 2018 ) consider whether these represent a threat to financial stability.

The academic study of banking began with Edgeworth ( 1888 ). He postulated that it is based on probability. In this respect, the nature of the business model depends on the probability that a bank will not be called upon to meet all its liabilities at the same time. This allows banks to lend more than they have in deposits. Because of the resultant mismatch between long term assets and short-term liabilities, a bank’s capital structure is very sensitive to liquidity trade-offs. This is explained by Diamond and Rajan ( 2000 ). They explain that this makes a bank a’relationship lender’. In effect, they suggest a bank is an intermediary that has borrowed from other investors.

Diamond and Rajan ( 2000 ) argue a lender can negotiate repayment obligations and that a bank benefits from its knowledge of the customer. As shall be shown, the new generation of digital challenger banks do not have the same tradeoffs or knowledge of the customer. They operate more like a broker providing a platform for banking services. This suggests that there will be more than one type of bank in the future and several different payment protocols. It also suggests that banks will have to data mine customer information to improve their understanding of a client’s financial needs.

The key focus of Diamond and Rajan ( 2000 ), however, was to position a traditional bank is an intermediary. Gurley and Shaw ( 1956 ) describe how the customer relationship means a bank can borrow funds by way of deposits (liabilities) and subsequently use them to lend or invest (assets). In facilitating this mediation, they provide a service whereby they store money and provide a mechanism to transmit money. With improvements in financial technology, however, money can be stored digitally, lenders and investors can source funds directly over the internet, and money transfer can be done digitally.

A review of financial technology and banking literature is provided by Thakor ( 2020 ). He highlights that financial service companies are now being provided by non-deposit taking contenders. This paper addresses one of the four research questions raised by his review, namely how theories of financial intermediation can be modified to accommodate banks, shadow banks, and non-intermediated solutions.

To be a bank, an entity must be authorized to accept retail deposits. A challenger bank is, therefore, still a bank in the traditional sense. It does not, however, have the costs of a branch network. A peer-to-peer lender, meanwhile, does not have a deposit base and therefore acts more like a broker. This leads to the issue that this paper addresses, namely how the banks of the future will conduct their intermediation.

In order to understand what the bank of the future will look like, it is necessary to understand the nature of the aforementioned intermediation, and the way it is changing. In this respect, there are two key types of intermediation. These are (1) quantitative asset transformation and, (2) brokerage. The latter is a common model adopted by challenger banks. Figure  1 depicts how these two types of financial intermediation match savers with borrowers. To avoid nuanced distinction between these two types of intermediation, it is common to classify banks by the services they perform. These can be grouped as either private, investment, or commercial banking. The service sub-groupings include payments, settlements, fund management, trading, treasury management, brokerage, and other agency services.

How banks act as intermediaries between lenders and borrowers. This function call also be conducted by intermediaries as brokers, for example by shadow banks. Disintermediation occurs over the internet where peer-to-peer lenders match savers to lenders

Financial technology has the ability to disintermediate the banking sector. The competitive pressures this results in will shape the banks of the future. The channels that will facilitate this are shown in Fig.  2 , namely the Internet and/or mobile devices. Challengers can participate in this by, (1) directly matching borrows with savers over the Internet and, (2) distributing white labels products. The later enables banking as a service and avoids the aforementioned liquidity mismatch.

The strategic options banks have to match lenders with borrowers. The traditional and challenger banks are in the same space, competing for business. The distributed banks use the traditional and challenger banks to white label banking services. These banks compete with payment platforms on social media. The Internet heralds an era of banking as a service

There are also physical changes that are being made in the delivery of services. Bricks and mortar branches are in decline. Mobile banking, or m-banking as Liu et al ( 2020 ) describe it, is an increasingly important distribution channel. Robotics are increasingly being used to automate customer interaction. As explained by Vishnu et al ( 2017 ), these improve efficiency and the quality of execution. They allow for increased oversight and can be built on legacy systems as well as from a blank canvas. Application programming interfaces (APIs) are bringing the same type of functionality to m-banking. They can be used to authorize third party use of banking data. How banks evolve over time is important because, according to the OECD, the activity in the financial sector represents between 20 and 30 percent of developed countries Gross Domestic Product.

In summary, financial technology has evolved to a level where online banks and banking as a service are challenging incumbents and the nature of banking mediation. Banking is rapidly transforming because of changes in such technology. At the same time, the solving of the double spending problem, whereby digital money can be cryptographically protected, has led to the possibility that paper money will become redundant at some point in the future. A theoretical framework is required to understand this evolving landscape. This is discussed next.

The theory of the banking firm: a revision

In financial theory, as eloquently explained by Fama ( 1980 ), banking provides an accounting system for transactions and a portfolio system for the storage of assets. That will not change for the banks of the future. Fama ( 1980 ) explains that their activities, in an unregulated state, fulfil the Modigliani–Miller ( 1959 ) theorem of the irrelevance of the financing decision. In practice, traditional banks compete for deposits through the interest rate they offer. This makes the transactional element dependent on the resulting debits and credits that they process, essentially making banks into bookkeeping entities fulfilling the intermediation function. Since this is done in response to competitive forces, the general equilibrium is a passive one. As such, the banking business model is vulnerable to disruption, particularly by innovation in financial technology.

A bank is an idiosyncratic corporate entity due to its ability to generate credit by leveraging its balance sheet. That balance sheet has assets on one side and liabilities on the other, like any corporate entity. The assets consist of cash, lending, financial and fixed assets. On the other side of the balance sheet are its liabilities, deposits, and debt. In this respect, a bank’s equity and its liabilities are its source of funds, and its assets are its use of funds. This is explained by Klein ( 1971 ), who notes that a bank’s equity W , borrowed funds and its deposits B is equal to its total funds F . This is the same for incumbents and challengers. This can be depicted algebraically if we let incumbents be represented by Φ and challengers represented by Γ:

Klein ( 1971 ) further explains that a bank’s equity is therefore made up of its share capital and unimpaired reserves. The latter are held by a bank to protect the bank’s deposit clients. This part is also mandated by regulation, so as to protect customers and indeed the entire banking system from systemic failure. These protective measures include other prudential requirements to hold cash reserves or other liquid assets. As shall be shown, banking services can be performed over the Internet without these protections. Banking as a service, as this phenomenon known, is expected to increase in the future. This will change the nature of the protection available to clients. It will change the way banks transform assets, explained next.

A bank’s deposits are said to be a function of the proportion of total funds obtained through the issuance of the ith deposit type and its total funds F , represented by α i . Where deposits, represented by Bs , are made in the form of Bs (i  =  1 *s n) , they generate a rate of interest. It follows that Si Bs  =  B . As such,

Therefor it can be said that,

The importance of Eq. 3 is that the balance sheet can be leveraged by the issuance of loans. It should be noted, however, that not all loans are returned to the bank in whole or part. Non-performing loans reduce the asset side of a bank’s balance sheet and act as a constraint on capital, and therefore new lending. Clearly, this is not the case with banking as a service. In that model, loans are brokered. That said, with the traditional model, an advantage of financial technology is that it facilitates the data mining of clients’ accounts. Lending can therefore be more targeted to borrowers that are more likely to repay, thereby reducing non-performing loans. Pari passu, the incumbent bank of the future will therefore have a higher risk-adjusted return on capital. In practice, however, banking as a service will bring greater competition from challengers and possible further erosion of margins. Alternatively, some banks will proactively engage in partnerships and acquisitions to maintain their customer base and address the competition.

A bank must have reserves to meet the demand of customers demanding their deposits back. The amount of these reserves is a key function of banking regulation. The Basel Committee on Banking Supervision mandates a requirement to hold various tiers of capital, so that banks have sufficient reserves to protect depositors. The Committee also imposes a framework for mitigating excessive liquidity risk and maturity transformation, through a set Liquidity Coverage Ratio and Net Stable Funding Ratio.

Recent revisions of theory, because of financial technology advances, have altered our understanding of banking intermediation. This will impact the competitive landscape and therefor shape the nature of the bank of the future. In this respect, the threat to incumbent banks comes from peer-to-peer Internet lending platforms. These perform the brokerage function of financial intermediation without the use of the aforementioned banking balance sheet. Unlike regulated deposit takers, such lending platforms do not create assets and do not perform risk and asset transformation. That said, they are reliant on investors who do not always behave in a counter cyclical way.

Financial technology in banking is not new. It has been used to facilitate electronic markets since the 1980’s. Thakor ( 2020 ) refers to three waves of application of financial innovation in banking. The advent of institutional futures markets and the changing nature of financial contracts fundamentally changed the role of banks. In response to this, academics extended the concept of a bank into an entity that either fulfills the aforementioned functions of a broker or a qualitative asset transformer. In this respect, they connect the providers and users of capital without changing the nature of the transformation of the various claims to that capital. This transformation can be in the form risk transfer or the application of leverage. The nature of trading of financial assets, however, is changing. Price discovery can now be done over the Internet and that is moving liquidity from central marketplaces (like the stock exchange) to decentralized ones.

Alongside these trends, in considering what the bank of the future will look like, it is necessary to understand the unregulated lending market that competes with traditional banks. In this part of the lending market, there has been a rise in shadow banks. The literature on these entities is covered by Adrian and Ashcraft ( 2016 ). Shadow banks have taken substantial market share from the traditional banks. They fulfil the brokerage function of banks, but regulators have only partial oversight of their risk transformation or leverage. The rise of shadow banks has been facilitated by financial technology and the originate to distribute model documented by Bord and Santos ( 2012 ). They use alternative trading systems that function as electronic communication networks. These facilitate dark pools of liquidity whereby buyers and sellers of bonds and securities trade off-exchange. Since the credit crisis of 2008, total broker dealer assets have diverged from banking assets. This illustrates the changed lending environment.

In the disintermediated market, banking as a service providers must rely on their equity and what access to funding they can attract from their online network. Without this they are unable to drive lending growth. To explain this, let I represent the online network. Extending Klein ( 1971 ), further let Ψ represent banking as a service and their total funds by F . This state is depicted as,

Theoretically, it can be shown that,

Shadow banks, and those disintermediators who bypass the banking system, have an advantage in a world where technology is ubiquitous. This becomes more apparent when costs are considered. Buchak et al. ( 2018 ) point out that shadow banks finance their originations almost entirely through securitization and what they term the originate to distribute business model. Diversifying risk in this way is good for individual banks, as banking risks can be transferred away from traditional banking balance sheets to institutional balance sheets. That said, the rise of securitization has introduced systemic risk into the banking sector.

Thus, we can see that the nature of banking capital is changing and at the same time technology is replacing labor. Let A denote the number of transactions per account at a period in time, and C denote the total cost per account per time period of providing the services of the payment mechanism. Klein ( 1971 ) points out that, if capital and labor are assumed to be part of the traditional banking model, it can be observed that,

It can therefore be observed that the total service charge per account at a period in time, represented by S, has a linear and proportional relationship to bank account activity. This is another variable that financial technology can impact. According to Klein ( 1971 ) this can be summed up in the following way,

where d is the basic bank decision variable, the service charge per transaction. Once again, in an automated and digital environment, financial technology greatly reduces d for the challenger banks. Swankie and Broby ( 2019 ) examine the impact of Artificial Intelligence on the evaluation of banking risk and conclude that it improves such variables.

Meanwhile, the traditional banking model can be expressed as a product of the number of accounts, M , and the average size of an account, N . This suggests a banks implicit yield is it rate of interest on deposits adjusted by its operating loss in each time period. This yield is generated by payment and loan services. Let R 1 depict this. These can be expressed as a fraction of total demand deposits. This is depicted by Klein ( 1971 ), if one assumes activity per account is constant, as,

As a result, whether a bank is structured with traditional labor overheads or built digitally, is extremely relevant to its profitability. The capital and labor of tradition banks, depicted as Φ i , is greater than online networks, depicted as I i . As such, the later have an advantage. This can be shown as,

What Klein (1972) failed to highlight is that the banking inherently involves leverage. Diamond and Dybving (1983) show that leverage makes bank susceptible to run on their liquidity. The literature divides these between adverse shock events, as explained by Bernanke et al ( 1996 ) or moral hazard events as explained by Demirgu¨¸c-Kunt and Detragiache ( 2002 ). This leverage builds on the balance sheet mismatch of short-term assets with long term liabilities. As such, capital and liquidity are intrinsically linked to viability and solvency.

The way capital and liquidity are managed is through credit and default management. This is done at a bank level and a supervisory level. The Basel Committee on Banking Supervision applies capital and leverage ratios, and central banks manage interest rates and other counter-cyclical measures. The various iterations of the prudential regulation of banks have moved the microeconomic theory of banking from the modeling of risk to the modeling of imperfect information. As mentioned, shadow and disintermediated services do not fall under this form or prudential regulation.

The relationship between leverage and insolvency risk crucially depends on the degree of banks total funds F and their liability structure L . In this respect, the liability structure of traditional banks is also greater than online networks which do not have the same level of available funds, depicted as,

Diamond and Dybvig ( 1983 ) observe that this liability structure is intimately tied to a traditional bank’s assets. In this respect, a bank’s ability to finance its lending at low cost and its ability to achieve repayment are key to its avoidance of insolvency. Online networks and/or brokers do not have to finance their lending, simply source it. Similarly, as brokers they do not face capital loss in the event of a default. This disintermediates the bank through the use of a peer-to-peer environment. These lenders and borrowers are introduced in digital way over the internet. Regulators have taken notice and the digital broker advantage might not last forever. As a result, the future may well see greater cooperation between these competing parties. This also because banks have valuable operational experience compared to new entrants.

It should also be observed that bank lending is either secured or unsecured. Interest on an unsecured loan is typically higher than the interest on a secured loan. In this respect, incumbent banks have an advantage as their closeness to the customer allows them to better understand the security of the assets. Berger et al ( 2005 ) further differentiate lending into transaction lending, relationship lending and credit scoring.

The evolution of the business model in a digital world

As has been demonstrated, the bank of the future in its various manifestations will be a consequence of the evolution of the current banking business model. There has been considerable scholarly investigation into the uniqueness of this business model, but less so on its changing nature. Song and Thakor ( 2010 ) are helpful in this respect and suggest that there are three aspects to this evolution, namely competition, complementary and co-evolution. Although liquidity transformation is evolving, it remains central to a bank’s role.

All the dynamics mentioned are relevant to the economy. There is considerable evidence, as outlined by Levine ( 2001 ), that market liberalization has a causal impact on economic growth. The impact of technology on productivity should prove positive and enhance the functioning of the domestic financial system. Indeed, market liberalization has already reshaped banking by increasing competition. New fee based ancillary financial services have become widespread, as has the proprietorial use of balance sheets. Risk has been securitized and even packaged into trade-able products.

Challenger banks are developing in a complementary way with the incumbents. The latter have an advantage over new entrants because they have information on their customers. The liquidity insurance model, proposed by Diamond and Dybvig ( 1983 ), explains how such banks have informational advantages over exchange markets. That said, financial technology changes these dynamics. It if facilitating the processing of financial data by third parties, explained in greater detail in the section on Open Banking.

At the same time, financial technology is facilitating banking as a service. This is where financial services are delivered by a broker over the Internet without resort to the balance sheet. This includes roboadvisory asset management, peer to peer lending, and crowd funding. Its growth will be facilitated by Open Banking as it becomes more geographically adopted. Figure  3 illustrates how these business models are disintermediating the traditional banking role and matching burrowers and savers.

The traditional view of banks ecosystem between savers and borrowers, atop the Internet which is matching savers and borrowers directly in a peer-to-peer way. The Klein ( 1971 ) theory of the banking firm does not incorporate the mirrored dynamics, and as such needs to be extended to reflect the digital innovation that impacts both borrowers and severs in a peer-to-peer environment

Meanwhile, the banking sector is co-evolving alongside a shadow banking phenomenon. Lenders and borrowers are interacting, but outside of the banking sector. This is a concern for central banks and banking regulators, as the lending is taking place in an unregulated environment. Shadow banking has grown because of financial technology, market liberalization and excess liquidity in the asset management ecosystem. Pozsar and Singh ( 2011 ) detail the non-bank/bank intersection of shadow banking. They point out that shadow banking results in reverse maturity transformation. Incumbent banks have blurred the distinction between their use of traditional (M2) liabilities and market-based shadow banking (non-M2) liabilities. This impacts the inter-generational transfers that enable a bank to achieve interest rate smoothing.

Securitization has transformed the risk in the banking sector, transferring it to asset management institutions. These include structured investment vehicles, securities lenders, asset backed commercial paper investors, credit focused hedge and money market funds. This in turn has led to greater systemic risk, the result of the nature of the non-traded liabilities of securitized pooling arrangements. This increased risk manifested itself in the 2008 credit crisis.

Commercial pressures are also shaping the banking industry. The drive for cost efficiency has made incumbent banks address their personally costs. Bank branches have been closed as technology has evolved. Branches make it easier to withdraw or transfer deposits and challenger banks are not as easily able to attract new deposits. The banking sector is therefore looking for new point of customer contact, such as supermarkets, post offices and social media platforms. These structural issues are occurring at the same time as the retail high street is also evolving. Banks have had an aggressive roll out of automated telling machines and a reduction in branches and headcount. Online digital transactions have now become the norm in most developed countries.

The financing of banks is also evolving. Traditional banks have tended to fund illiquid assets with short term and unstable liquid liabilities. This is one of the key contributors to the rise to the credit crisis of 2008. The provision of liquidity as a last resort is central to the asset transformation process. In this respect, the banking sector experienced a shock in 2008 in what is termed the credit crisis. The aforementioned liquidity mismatch resulted in the system not being able to absorb all the risks associated with subprime lending. Central banks had to resort to quantitative easing as a result of the failure of overnight funding mechanisms. The image of the entire banking sector was tarnished, and the banks of the future will have to address this.

The future must learn from the mistakes of the past. The structural weakness of the banking business model cannot be solved. That said, the latest Basel rules introduce further risk mitigation, improved leverage ratios and increased levels of capital reserve. Another lesson of the credit crisis was that there should be greater emphasis on risk culture, governance, and oversight. The independence and performance of the board, the experience and the skill set of senior management are now a greater focus of regulators. Internal controls and data analysis are increasingly more robust and efficient, with a greater focus on a banks stable funding ratio.

Meanwhile, the very nature of money is changing. A digital wallet for crypto-currencies fulfills much the same storage and transmission functions of a bank; and crypto-currencies are increasing being used for payment. Meanwhile, in Sweden, stores have the right to refuse cash and the majority of transactions are card based. This move to credit and debit cards, and the solving of the double spending problem, whereby digital money can be crypto-graphically protected, has led to the possibility that paper money could be replaced at some point in the future. Whether this might be by replacement by a CBDC, or decentralized digital offering, is of secondary importance to the requirement of banks to adapt. Whether accommodating crytpo-currencies or CBDC’s, Kou et al. ( 2021 ) recommend that banks keep focused on alternative payment and money transferring technologies.

Central banks also have to adapt. To limit disintermediation, they have to ensure that the economic design of their sponsored digital currencies focus on access for banks, interest payment relative to bank policy rate, banking holding limits and convertibility with bank deposits. All these developments have implications for banks, particularly in respect of funding, the secure storage of deposits and how digital currency interacts with traditional fiat money.

Open banking

Against the backdrop of all these trends and changes, a new dynamic is shaping the future of the banking sector. This is termed Open Banking, already briefly mentioned. This new way of handling banking data protocols introduces a secure way to give financial service companies consensual access to a bank’s customer financial information. Figure  4 illustrates how this works. Although a fairly simple concept, the implications are important for the banking industry. Essentially, a bank customer gives a regulated API permission to securely access his/her banking website. That is then used by a banking as a service entity to make direct payments and/or download financial data in order to provide a solution. It heralds an era of customer centric banking.

How Open Banking operates. The customer generates data by using his bank account. A third party provider is authorized to access that data through an API request. The bank confirms digitally that the customer has authorized the exchange of data and then fulfills the request

Open Banking was a response to the documented inertia around individual’s willingness to change bank accounts. Following the Retail Banking Review in the UK, this was addressed by lawmakers through the European Union’s Payment Services Directive II. The legislation was designed to make it easier to change banks by allowing customers to delegate authority to transfer their financial data to other parties. As a result of this, a whole host of data centric applications were conceived. Open banking adds further momentum to reshaping the future of banking.

Open Banking has a number of quite revolutionary implications. It was started so customers could change banks easily, but it resulted in some secondary considerations which are going to change the future of banking itself. It gives a clear view of bank financing. It allows aggregation of finances in one place. It also allows can give access to attractive offerings by allowing price comparisons. Open Banking API’s build a secure online financial marketplace based on data. They also allow access to a larger market in a faster way but the third-party providers for the new entrants. Open Banking allows developers to build single solutions on an API addressing very specific problems, like for example, a cash flow based credit rating.

Romānova et al. ( 2018 ) undertook a questionnaire on the Payment Services Directive II. The results suggest that Open Banking will promote competitiveness, innovation, and new product development. The initiative is associated with low costs and customer satisfaction, but that some concerns about security, privacy and risk are present. These can be mitigated, to some extent, by secure protocols and layered permission access.

Discussion: strategic options

Faced with these disruptive trends, there are four strategic options for market participants to con- sider. There are (1) a defensive customer retention strategy for incumbents, (2) an aggressive customer acquisition strategy for challenger banks (3) a banking as a service strategy for new entrants, and (4) a payments strategy for social media platforms.

Each of these strategies has to be conducted in a competitive marketplace for money demand by potential customers. Figure  5 illustrates where the first three strategies lie on the tradeoff between money demand and interest rates. The payment strategy can’t be modeled based on the supply of money. In the figure, the market settles at a rate L 2 . The incumbent banks have the capacity to meet the largest supply of these loans. The challenger banks have a constrained function but due to a lower cost base can gain excess rent through higher rates of interest. The peer-to-peer bank as a service brokers must settle for the market rate and a constrained supply offering.

The money demand M by lenders on the y axis. Interest rates on the y axis are labeled as r I and r II . The challenger banks are represented by the line labeled Γ. They have a price and technology advantage and so can lend at higher interest rates. The brokers are represented by the line labeled Ω. They are price takers, accepting the interest rate determined by the market. The same is true for the incumbents, represented by the line labeled Φ but they have a greater market share due to their customer relationships. Note that payments strategy for social media platforms is not shown on this figure as it is not affected by interest rates

Figure  5 illustrates that having a niche strategy is not counterproductive. Liu et al ( 2020 ) found that banks performing niche activities exhibit higher profitability and have lower risk. The syndication market now means that a bank making a loan does not have to be the entity that services it. This means banks in the future can better shape their risk profile and manage their lending books accordingly.

An interesting question for central banks is what the future Deposit Supply function will look like. If all three forms: open banking, traditional banking and challenger banks develop together, will the bank of the future have the same Deposit Supply function? The Klein ( 1971 ) general formulation assumes that deposits are increasing functions of implicit and explicit yields. As such, the very nature of central bank directed monetary policy may have to be revisited, as alluded to in the earlier discussion on digital money.

The client retention strategy (incumbents)

The competitive pressures suggest that incumbent banks need to focus on customer retention. Reichheld and Kenny ( 1990 ) found that the best way to do this was to focus on the retention of branch deposit customers. Obviously, another way is to provide a unique digital experience that matches the challengers.

Incumbent banks have a competitive advantage based on the information they have about their customers. Allen ( 1990 ) argues that where risk aversion is observable, information markets are viable. In other words, both bank and customer benefit from this. The strategic issue for them, therefore, becomes the retention of these customers when faced with greater competition.

Open Banking changes the dynamics of the banking information advantage. Borgogno and Colangelo ( 2020 ) suggest that the access to account (XS2A) rule that it introduced will increase competition and reduce information asymmetry. XS2A requires banks to grant access to bank account data to authorized third payment service providers.

The incumbent banks have a high-cost base and legacy IT systems. This makes it harder for them to migrate to a digital world. There are, however, also benefits from financial technology for the incumbents. These include reduced cost and greater efficiency. Financial technology can also now support platforms that allow incumbent banks to sell NPL’s. These platforms do not require the ownership of assets, they act as consolidators. The use of technology to monitor the transactions make the processing cost efficient. The unique selling point of such platforms is their centralized point of contact which results in a reduction in information asymmetry.

Incumbent banks must adapt a number of areas they got to adapt in terms of their liquidity transformation. They have to adapt the way they handle data. They must get customers to trust them in a digital world and the way that they trust them in a bricks and mortar world. It is no coincidence. When you go into a bank branch that is a great big solid building great big facade and so forth that is done deliberately so that you trust that bank with your deposit.

The risk of having rising non-performing loans needs to be managed, so customer retention should be selective. One of the puzzles in banking is why customers are regularly denied credit, rather than simply being charged a higher price for it. This credit rationing is often alleviated by collateral, but finance theory suggests value is based on the discounted sum of future cash flows. As such, it is conceivable that the bank of the future will use financial technology to provide innovative credit allocation solutions. That said, the dual risks of moral hazard and information asymmetries from the adoption of such solutions must be addressed.

Customer retention is especially important as bank competition is intensifying, as is the digitalization of financial services. Customer retention requires innovation, and that innovation has been moving at a very fast rate. Until now, banks have traditionally been hesitant about technology. More recently, mergers and acquisitions have increased quite substantially, initiated by a need to address actual or perceived weaknesses in financial technology.

The client acquisition strategy (challengers)

As intermediaries, the challenger banks are the same as incumbent banks, but designed from the outset to be digital. This gives them a cost and efficiency advantage. Anagnostopoulos ( 2018 ) suggests that the difference between challenger and traditional banks is that the former address its customers problems more directly. The challenge for such banks is customer acquisition.

Open Banking is a major advantage to challenger banks as it facilitates the changing of accounts. There is widespread dissatisfaction with many incumbent banks. Open Banking makes it easier to change accounts and also easier to get a transaction history on the client.

Customer acquisition can be improved by building trust in a brand. Historically, a bank was physically built in a very robust manner, hence the heavy architecture and grand banking halls. This was done deliberately to engender a sense of confidence in the deposit taking institution. Pure internet banks are not able to do this. As such, they must employ different strategies to convey stability. To do this, some communicate their sustainability credentials, whilst others use generational values-based advertising. Customer acquisition in a banking context is traditionally done by offering more attractive rates of interest. This is illustrated in Fig.  5 by the intersect of traditional banks with the market rate of interest, depicted where the line Γ crosses L 2 . As a result of the relationship with banking yield, teaser rates and introductory rates are common. A customer acquisition strategy has risks, as consumers with good credit can game different challenger banks by frequently changing accounts.

Most customer acquisition, however, is done based on superior service offering. The functionality of challenger banking accounts is often superior to incumbents, largely because the latter are built on legacy databases that have inter-operability issues. Having an open platform of services is a popular customer acquisition technique. The unrestricted provision of third-party products is viewed more favorably than a restricted range of products.

The banking as a service strategy (new entrants)

Banking from a customer’s perspective is the provision of a service. Customers don’t care about the maturity transformation of banking balance sheets. Banking as a service can be performed without recourse to these balance sheets. Banking products are brokered, mostly by new entrants, to individuals as services that can be subscribed to or paid on a fee basis.

There are a number banking as a service solutions including pre-paid and credit cards, lending and leasing. The banking as a service brokers are effectively those that are aggregating services from others using open banking to enable banking as a service.

The rise of banking as a service needs to be understood as these compete directly with traditional banks. As explained, some of these do this through peer-to-peer lending over the internet, others by matching borrows and sellers, conducting mediation as a loan broker. Such entities do not transform assets and do not have banking licenses. They do not have a branch network and often don not have access to deposits. This means that they have no insurance protection and can be subject to interest rate controls.

The new genre of financial technology, banking as a service provider, conduct financial services transformation without access to central bank liquidity. In a distributed digital asset world, the assets are stored on a distributed ledger rather than a traditional banking ledger. Financial technology has automated credit evaluation, savings, investments, insurance, trading, banking payments and risk management. These banking as a service offering are only as secure as the technology on which they are built.

The social media payment strategy (disintermediators and disruptors)

An intermediation bank is a conceptual idea, one created solely on a social networking site. Social media has developed a market for online goods and services. Williams ( 2018 ) estimates that there are 2.46 billion social media users. These all make and receive payments of some kind. They demand security and functionality. Importantly, they have often more clients than most banks. As such, a strategy to monetize the payments infrastructure makes sense.

All social media platforms are rich repositories of data. Such platforms are used to buy and sell things and that requires payments. Some platforms are considering evolving their own digital payment, cutting out the banks as middlemen. These include Facebook’s Diem (formerly Libra), a digital currency, and similar developments at some of the biggest technology companies. The risk with social media payment platform is that there is systemic counter-party protection. Regulators need to address this. One way to do this would be to extend payment service insurance to such platforms.

Social media as a platform moves the payment relationship from a transaction to a customer experience. The ability to use consumer desires in combination with financial data has the potential to deliver a number of new revenue opportunities. These will compete directly with the banks of the future. This will have implications for (1) the money supply, (2) the market share of traditional banks and, (3) the services that payment providers offer.

Further research

Several recommendations for research derive from both the impact of disintermediation and the four proposed strategies that will shape banking in the future. The recommendations and suggestions are based on the mentioned papers and the conclusions drawn from them.

As discussed, the nature of intermediation is changing, and this has implications for the pricing of risk. The role of interest rates in banking will have to be further reviewed. In a decentralized world based on crypto currencies the central banks do not have the same control over the money supply, This suggest the quantity theory of money and the liquidity preference theory need to be revisited. As explained, the Internet reduces much of the friction costs of intermediation. Researchers should ask how this will impact maturity transformation. It is also fair to ask whether at some point in the future there will just be one big bank. This question has already been addressed in the literature but the Internet facilities the possibility. Diamond ( 1984 ) and Ramakrishnan and Thakor ( 1984 ) suggested the answer was due to diversification and its impact on reducing monitoring costs.

Attention should be given by academics to the changing nature of banking risk. How should regulators, for example, address the moral hazard posed by challenger banks with weak balance sheets? What about deposit insurance? Should it be priced to include unregulated entities? Also, what criteria do borrowers use to choose non-banking intermediaries? The changing risk environment also poses two interesting practical questions. What will an online bank run look like, and how can it be averted? How can you establish trust in digital services?

There are also research questions related to the nature of competition. What, for example, will be the nature of cross border competition in a decentralized world? Is the credit rationing that generates competition a static or dynamic phenomena online? What is the value of combining consumer utility with banking services?

Financial intermediaries, like banks, thrive in a world of deficits and surpluses supported by information asymmetries and disconnectedness. The connectivity of the internet changes this dynamic. In this respect, the view of Schumpeter ( 1911 ) on the role of financial intermediaries needs revisiting. Lenders and borrows can be connected peer to peer via the internet.

All the dynamics mentioned change the nature of moral hazard. This needs further investigation. There has been much scholarly research on the intrinsic riskiness of the mismatch between banking assets and liabilities. This mismatch not only results in potential insolvency for a single bank but potentially for the whole system. There has, for example, been much debate on the whether a bank can be too big to fail. As a result of the riskiness of the banking model, the banks of the future will be just a liable to fail as the banks of the past.

This paper presented a revision of the theory of banking in a digital world. In this respect, it built on the work of Klein ( 1971 ). It provided an overview of the changing nature of banking intermediation, a result of the Internet and new digital business models. It presented the traditional academic view of banking and how it is evolving. It showed how this is adapted to explain digital driven disintermediation.

It was shown that the banking industry is facing several documented challenges. Risk is being taken of balance sheet, securitized, and brokered. Financial technology is digitalizing service delivery. At the same time, the very nature of intermediation is being changed due to digital currency. It is argued that the bank of the future not only has to face these competitive issues, but that technology will enhance the delivery of banking services and reduce the cost of their delivery.

The paper further presented the importance of the Open Banking revolution and how that facilitates banking as a service. Open Banking is increasing client churn and driving banking as a service. That in turn is changing the way products are delivered.

Four strategies were proposed to navigate the evolving competitive landscape. These are for incumbents to address customer retention; for challengers to peruse a low-cost digital experience; for niche players to provide banking as a service; and for social media platforms to develop payment platforms. In all these scenarios, the banks of the future will have to have digital strategies for both payments and service delivery.

It was shown that both incumbents and challengers are dependent on capital availability and borrowers credit concerns. Nothing has changed in that respect. The risks remain credit and default risk. What is clear, however, is the bank has become intrinsically linked with technology. The Internet is changing the nature of mediation. It is allowing peer to peer matching of borrowers and savers. It is facilitating new payment protocols and digital currencies. Banks need to evolve and adapt to accommodate these. Most of these questions are empirical in nature. The aim of this paper, however, was to demonstrate that an understanding of the banking model is a prerequisite to understanding how to address these and how to develop hypotheses connected with them.

In conclusion, financial technology is changing the future of banking and the way banks intermediate. It is facilitating digital money and the online transmission of financial assets. It is making banks more customer enteric and more competitive. Scholarly investigation into banking has to adapt. That said, whatever the future, trust will remain at the core of banking. Similarly, deposits and lending will continue to attract regulatory oversight.

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Digital Finance and Green Development: Characteristics, Mechanisms, and Empirical Evidences

Rulong zhuang.

1 School of Business, Ningbo University, Ningbo 315211, China

2 School of International Trade & Economics, Ningbo University of Finance & Economics, Ningbo 315175, China

Chaoyang Zhang

Associated data.

This paper takes 30 provincial-level units in China as samples; Tibet, Hong Kong, Macao, and Taiwan are excluded due to the lack of data. The green development (energy consumption per unit of GDP) mainly comes from the China Statistical Yearbook, the China Energy Statistical Yearbook, and regional energy balance tables. Digital finance data come from Peking University Internet Finance Research Center. The remaining economic and social statistics mainly come from statistical yearbooks and statistical bulletins of various provinces, autonomous regions, and municipalities. The air pollution data of robustness tests are obtained from the online monitoring and analysis platform of China’s air quality.

As the emergence of digital finance is relatively short, research results on digital finance mainly focus on products, services, coverage, policies, etc. The mechanism and role of digital finance in influencing green development are still lacking attention. In the above context, this paper used spatial analysis methods to describe spatiotemporal characteristics in detail, and empirically tested the mechanism and path of digital finance affecting green development through spatial econometric models and intermediary models. The results showed that: (1) During the study period, digital finance and green development have been improved to varying degrees, but the inter-provincial differences are still obvious. (2) The spatial trends of digital finance and green development are similar, and the overall performance is “high in the east, low in the west, high in the south, and low in the north”. (3) The empirical tests found that digital finance is an effective force to reduce energy consumption per unit of GDP and improve the level of green development. It validates Hypothesis 1. Meanwhile, the Heterogeneity effect is noteworthy due to different regions, types, and levels. (4) The promotion of green development by digital finance is mainly concentrated in the local region and has not yet shown a significant green spillover effect for surrounding areas. It validates Hypothesis 2. (5) Energy structure, industrial upgrading, and technological progress are three paths for digital finance affecting green development. Hypothesis 3 is verified. Finally, the innovation of this paper lies in the design of the research framework, diversity of research methods, and policy implications. The main contribution is to enrich and expand the environmental finance theory and provide detailed empirical evidence. In addition, we put forward effective measures and suggestions including local governments, financial institutions, and enterprises based on the empirical results. Local governments should pay attention to policy implementation and operation effects, financial institutions constantly need to strengthen the supply of advanced digital financial products and services, and enterprises should attach importance to the use of digital financial tools to achieve green and low-carbon development in the future.

1. Introduction

For quite some time, an extensive economic development model with large factor input has caused serious resource and environmental problems, and the concept of green development has become the consensus of the whole society. In 2021, China’s carbon emissions have reached 11.47 billion tons, twice that of the United States (5 billion tons) and four times that of the European Union (2.79 billion tons), and have not yet reached the peak. At the same time, digital finance has developed rapidly. In 2020, China’s mobile payment business and payment finance reached 123.22 billion transactions and 432.16 trillion CNY, with year-on-year growth of 21.48% and 24.50% respectively. The most frequently used mobile payment products are WeChat, Alipay, and UnionPay cloud flash payment. In addition, 150 million users in China have purchased online financial products in 2020. Influenced by the COVID-19 pandemic in 2020, traditional financial services are subject to many restrictions in terms of sales, investment, after-sales, etc., further strengthening the trend of online “contactless” financial services.

Digital finance is a kind of new type of financial service, which is mainly formed by combining the Internet and Information technology with traditional financial services, including mobile payment, online banking, financial service outsourcing, online loans, online insurance, online funds, and other forms. What is important is that digital finance itself is also a kind of green finance. In the process of achieving green development, digital finance will play a non-negligible role in optimizing resource allocation, enhancing technological innovation, and promoting industrial upgrading, and so on. It will become one of the important driving forces to achieve the “dual carbon” goal [ 1 , 2 , 3 , 4 ]. The “dual carbon” goal was first proposed by Chinese President Xi at the 75th United Nations General Assembly in 2020. The main contents are that China will improve its national independent contribution, adopt more powerful policies and measures, strive to reach the peak of carbon dioxide emissions by 2030, and strive to achieve carbon neutrality by 2060. Against this background, we also regard the realization of the “dual carbon” goal as the important research content and direction of this paper.

To better achieve the “dual carbon” goal, promote the green transformation of the industry, and reduce carbon emissions, this paper took digital finance as the research object and systematically depicted the spatiotemporal characteristics. On this basis, an econometric model is constructed to judge the impact of digital finance on green development and its path. Compared with the existing research the contribution of this paper mainly lies in the following three points. Firstly, it brings digital finance and green development into the unified research framework, and carefully analyses the mechanism of digital finance affecting green development. Secondly, it deeply explores the specific path of the impact of digital finance on green development and tries to test the mediation effect from the three dimensions: energy structure, industrial upgrading, and technological progress. Thirdly, considering the possible spatial relationship, this paper discusses the spatial effect of digital finance on green development from the perspective of “Local-foreign”. Finally, based on the above research, this paper puts forward countermeasures and enlightenments for promoting the development of digital finance and realizing the goal of green, low-carbon, and sustainable development.

Figure 1 illustrates the research framework of this paper.

The research framework.

2. Literature Review

2.1. studies on digital finance.

With the vigorous development of artificial intelligence, cloud computing, and big data technology, finance has strengthened the comprehensive integration with emerging technologies. Digital finance is emerging in this context. In addition, with the increasingly important role of digital finance, it has gradually become a research hotspot in the financial field [ 5 , 6 , 7 ]. At present, the academic researches on digital finance mainly focus on two aspects. The first aspect is the discussion of digital finance itself, which originates from a deep understanding of the connotation. These contents include digital financial products, services, industries, supervision, etc. [ 8 , 9 ]. The second aspect is the analysis of the economic and social impact of digital finance through comparison with traditional finance. Those impacts are very extensive, including industrial upgrading, product innovation, technological progress, citizen welfare, poverty alleviation, economic growth, and regional coordinated development, etc. [ 10 , 11 , 12 , 13 , 14 ]. The general conclusion is that digital finance can effectively promote industrial upgrading, technological progress, welfare improvement, and economic development. Some scholars discussed the relationship between government expenditure and intergenerational mobility, which provides a direction for the government to use digital financial tools to play an inclusive role to achieve equal distribution of public services [ 15 ]. At the same time, some scholars have also noticed that digital finance will inevitably be affected by various risks while playing a positive role. Therefore, it is indispensable to strengthen financial supervision to ensure its efficient and healthy development [ 16 ]. In addition, some scholars pay attention to the impact of e-commerce development closely related to digital finance on consumer behaviors and retail space values and analyzed and explained it through store rents [ 17 ]. It is necessary to mention that due to the green nature of digital finance and the proposed carbon emission reduction targets in various countries and regions, the environmental effects of digital finance have also attracted the attention of scholars. These will be explained as follows.

2.2. Studies on Green Development

With the continuous development of urbanization and industrialization, the constraints of resources and the environment have gradually become an important obstacle restricting the sustainable development of the economy and society. In this context, the concept of green development has gradually formed and gained consensus at home and abroad [ 18 , 19 , 20 ]. Green development emphasizes the transformation and optimization of human production and lifestyle, the reduction of resource consumption and environmental damage, and the realization of healthy and sustainable economic and social development. There are many similar concepts to green development, such as sustainable development, green economy, low-carbon economy, green growth, etc. [ 21 , 22 ]. Among them, sustainable development can be seen as the theoretical origin of green development. Through combing the relevant literature at home and abroad, we found that the research on green development mainly includes connotation, concept, level, path, method, etc. Among them, scientific measurement and seeking future development paths have become the focus of many experts and scholars [ 23 ]. As one of the important directions of green development, digital finance has attracted more and more attention [ 24 , 25 ]. With the establishment of the carbon trading mechanism, some scholars also began to study the carbon emission reduction effect of the carbon trading mechanism [ 26 ]. In addition, due to the impact of the COVID-19 epidemic in recent years, the impact of the COVID-19 epidemic on the stock prices of energy enterprises has also attracted attention [ 27 , 28 ]. Finally, the research on the relationship between economic growth and green development cannot be ignored. The most representative topic is the Kuznets curve [ 29 ].

2.3. Studies on the Relationship between Digital Finance and Green Development

Digital finance is the integration of traditional finance and modern science and technology, which still has the basic characteristics of traditional finance, so the research on the impact of traditional finance on environmental pollution can provide references for this paper [ 30 ]. The relationship between finance and the environment has been studied for a long time in the academic circle, but there has always been controversy. The main academic views can be summarized as follows: The first view is that the prosperity of the financial market contributes to economic growth, but economic growth will also lead to an increase in energy demand, which may eventually lead to more pollutant emissions and increase environmental pressure. The second view is that, in addition to increasing energy demand and pollutant emissions, financial development may also improve energy use and resource allocation efficiency through scientific and technological progress and industrial structure upgrading and may also play a positive role in environmental protection [ 31 , 32 , 33 , 34 ]. In addition, the third view holds that there is a nonlinear relationship between financial development and environmental pollution [ 35 ]. Based on existing research, this paper attempts to explore the relationship between digital finance and environmental pollution to enrich and expand its scope and contents. On this subject, there is also some relevant research in the academic circle, mainly involving production efficiency, technological innovation, industrial structure, etc. [ 36 , 37 , 38 ].

Although the above literature provides rich perspectives for our research, there are still some shortcomings. The discussion on digital finance mainly focuses on regulations, services, products, risks, and policies. Regrettably, there is still a lack of enough attention to the internal relationship between digital finance and green development, especially to explore the mechanism of digital finance affecting green development by using reasonable data and scientific methods. In addition, most studies do not consider the possible spatial correlation between digital finance and green development, which will lead to errors in theoretical research and practical analyses.

3. Theoretical Analyses and Research Hypotheses

3.1. digital finance and green development.

Sustainable development theory and environmental finance theory provide useful guidance for the mechanism analysis of digital finance affecting green development [ 39 , 40 , 41 ]. From the perspective of sustainable development theory, digital finance has realized its own green transformation through the combination of information technology, reduced the resource consumption of the financial industry itself, and improved operating efficiency. At the same time, compared with traditional finance, digital finance plays a more significant role in supporting and promoting green industry and green technology, and contributes to the sustainable development of the economy and society. The environmental finance theory believes that the environment is a factor that the financial industry needs to focus on. Finance is also responsible for the health of the environment. Environmental finance theory emphasizes the innovation of financial technology, the upgrading of financial products, and the rationality of financial structure, which provides effective financial support for environmental protection. At the same time, environmental finance theory also involves some deep-seated institutional arrangements.

On the one hand, compared with traditional finance, the digital operation of finance can effectively reduce the consumption of resources, improving the efficiency of resource allocation, which shows an obvious “green effect” on finance and its related industries. On the other hand, digital finance can expand the coverage of financial services, guide and encourage more financial resources to low carbon, environmental protection, technological innovation, and high-tech industries. At the same time, it effectively curbs pollution investment, which not only helps to accelerate the green transformation of China’s economy, but also helps to promote technological progress in environmental protection, new energy, and energy conservation. In addition, digital finance can play the role of lubricant, accelerate the free circulation and effective allocation of capital, information, digital, technology, and other elements, and correct the market failure and financial fragmentation caused by information asymmetry in traditional finance [ 42 , 43 , 44 ]. It is an important hand to realize green development, transformation, and upgrading, and plays a decisive role in supporting green industry and sustainable economic and social development. Based on the above analyses, we propose the first research hypothesis.

Digital finance is conducive to promoting green development.

3.2. The Spatial Effect of Digital Finance on Green Development

According to the first law of geography, digital finance, as an economic phenomenon, inevitably has spatial correlation, which is significantly affected by geographical distance. Furthermore, through the theory of space economy and the theory of factor flow, it can be found that digital finance may release this spillover effect through the flow of various financial elements between regions.

The development of digital finance cannot be separated from traditional finance and the real economy, and the real economy cannot be separated from data, talent, technology, and other production factors. Therefore, the emergence and development of digital finance first appeared in metropolises with a high level of economic development, rich financial elements, and complete mobile Internet facilities. Since then, as “Digital China” has become a national strategy, the degree of financial marketization has been continuously improved, and the cross-regional flow of financial elements has made spatial correlation and interaction dependence increasingly strengthened. Driven by its own development needs and the profit-seeking characteristics of capital, digital finance began to expand and extend to other regions, forming a spatial inclusion. From this perspective, digital finance is not only conducive to local green development but also may have a “green spillover effect” on surrounding areas [ 45 ]. However, China’s financial market is still in the process of integration. Influenced by local governments, markets, and industries, the problem of regional segmentation is still obvious, and a unified financial market has not yet been formed. Although compared with traditional finance, digital finance has a wider coverage and higher liquidity, but in the case of insufficient high-level coordination, rigid constraints of administrative divisions, and local governments’ consideration of maximizing the interests within their jurisdiction, digital finance, as a resource, will also show scarcity among regions. Its development direction is mainly to meet the actual needs of local green development, while for other regions, it may inhibit the green spillover effect and even lead to potential pollution risks in surrounding areas. Based on the above analyses, we propose the second research hypothesis.

There may be a spatial spillover effect of digital finance on green development, but this effect is uncertain.

3.3. The Mechanism of Digital Finance Affecting Green Development

Under the guidance of sustainable development theory, green growth theory, energy economy theory, endogenous economic growth theory, and industrial structure upgrading theory, combined with existing research results, we believe that digital finance may affect green development from three paths: energy structure, technological progress, and industrial upgrading [ 46 , 47 ]. Of course, there should be many paths for digital finance to affect green development, which will be one of the key research contents and directions in the future.

According to energy economics theory, the relationship between energy utilization and environmental pollution has always been the focus of energy economics research. In China, energy utilization is an important source of environmental pollution and has a direct and widespread impact on green development. At the same time, as an advanced form of traditional finance, digital finance will inevitably enter the field of energy production and consumption, which will certainly have an important impact on the energy structure. Therefore, according to the guidance of relevant theories, we believe that digital finance may have an impact on green development by improving the energy structure. In addition, under the guidance of the “dual carbon” goal, green and low-carbon development is a complex project and a long-term task for sustainable economic and social development. Therefore, we must look for the direction and path to promote green development based on the basic national conditions of coal as the main fuel for a long time.

Specifically, digital finance can guide the reduction and replacement of backward production capacity in the energy industry, reduce energy consumption and gradually realize the transformation of energy structure through more green, environmentally friendly, and efficient technical support. At the same time, in the process of formulating and designing policies, products, and services, digital finance pays more attention to the orderly conversion of traditional energy to new energy and takes overall consideration to reducing the proportion of coal power and increasing the proportion of clean energy such as hydropower, wind power and photoelectric. Digital finance can play a further role as a strategy and tool for low-carbon transformation. With the help of structural monetary policy, diversified tools such as credit, bonds, equity investment, and trust can be used to provide financial support for green and low-carbon development. Therefore, digital finance can promote the adjustment of energy structure and gradually transition to green, low-carbon, and clean energy through technical support, capital allocation, and monetary policy for energy and related industries [ 48 , 49 , 50 , 51 ].

From the perspective of endogenous growth theory, combined with Solo models, sustainable economic growth comes from the improvement of total factor productivity, which is usually caused by technological progress [ 52 ]. As an advanced form of traditional financial integration with digital information technology, digital finance itself represents technological progress. At the same time, digital finance will also promote sustainable economic development through technological progress, which implies green development. In addition, from the perspective of industrial structure theory, the upgrading of industrial structure will help to improve productivity, reduce resource consumption, and reduce pollution and damage to the environment [ 53 , 54 ]. Therefore, it will help to achieve green development. Under the guidance of relevant theories, we believe that digital finance may promote green development through industrial upgrading and technological progress. In addition, from the perspective of externality theory, due to its significant positive externalities, digital finance can be actively encouraged by policies as an effective means of internalizing externalities, such as reducing the accuracy of orientation, rediscount, and refinancing, thus promoting green industrialization and industrial greening.

In addition to financial policies, the huge advantages of digital finance can not only provide targeted financial support for enterprises’ low-carbon transformation or green technology development, but also promote the development of the environmental protection industry, effectively overcome financing constraints, information asymmetry, moral hazard, and other problems, and provide financial security for enterprises’ green transformation. At the same time, financial policies can effectively curb the financing scale of environmentally unfriendly enterprises, increase the pressure on enterprise development, and ultimately promote enterprise technology upgrading and green transformation. In addition, compared with traditional finance, digital finance can effectively disperse the investment risk of enterprises, effectively gather and guide the green investment of social funds, and provide risk guarantee for enterprises’ green technology upgrading, green product development, and research and development of major energy conservation and environmental protection projects. Finally, digital finance can also provide the precise impetus for the low-carbon transformation of economic and social development by enabling green finance [ 42 , 43 ]. Based on the above analyses, we propose a third research hypothesis.

Digital finance can boost green development by improving energy structure, promoting industrial upgrading and technological progress through the play of its own advantages.

4. Model Constructions and Variable Selections

4.1. model constructions.

We established a panel econometric model to effectively identify the possible impact of digital finance on green development. Hausman Test found that the fixed effect model is better than that of the random effect model, and hence, we chose the dual fixed effect model which controlled spatiotemporal effects. The model is constructed as follows:

In the above formula, gd represents green development, characterized by energy consumption per unit of GDP; df is the digital financial index; X ′ i t are the control variables; ϕ is the coefficient of each control variable. a i and λ t represent individual and time effects respectively. γ is a constant term, and u i t is the random error term.

Considering that there may be a spatial correlation between variables, the original assumption that samples are independent of each other is challenged, which may lead to biased error in the estimation of the general panel econometric model. Therefore, the spatial econometric model which takes spatial relationships into measurement is further constructed to capture more accurate causality between variables [ 55 ]. Taking the Spatial Durbin Model (SDM) as an example, the construction is as follows:

In the above formula, W represents the spatial weights matrix. Considering the possible law of distance attenuation, we selected two kinds of matrices: spatial contiguity matrix and nearest neighbors matrix. W ln g d i t , W ln d f i t and W X ′ i t are spatial lag terms respectively, and ρ , ξ , ζ are coefficients of them.

Combined with the above Hypothesis 3, the mechanism of digital finance affecting green development is also one of the key research contents of this paper. Therefore, referring to the relevant research progress of Zhonglin Wen et al., we used the causal steps approach to empirically test whether there is a real mediation effect in energy structure, industrial upgrading, and technological progress [ 56 , 57 ]. The model is constructed as follows:

Three econometric models are needed to test the intermediary effect. Mediator variables represent intervening variables, which are energy structure, industrial upgrading, and technological progress. The remaining variables are consistent with those in formula (1). The verification steps are as follows:

Firstly, we should check γ , γ 2 , and η in the model (3)~(5). If the three coefficients are significant, it shows that there is a mediation effect. Secondly, we should check γ 3 in the model (5). If significant, it means that there is a direct effect, that is, “partial mediator”. Otherwise, only the mediation effect can be established. Thirdly, we should compare the signs of γ 3 and γ 2 × η . If the two are the same, it means that a partial mediation effect is established, otherwise, it is the hiding effect. Lastly, by comparison, we found that γ 3 in model (5) is lower than γ in model (3), which further indicates that the mediating variable plays a significant mediating role.

4.2. Variable Selections

(1) Explained variable. According to the energy economy theory and relevant research literature, we finally chose energy consumption per unit of GDP ( gd ) to represent green development, and the unit is metric ton standard coal/ten thousand CNY. Energy consumption per unit GDP can not only directly reflect the dependence of economic development on energy, but can also indirectly reflect the industrial structure and technological innovation level. The higher the energy consumption per unit GDP is, the stronger the dependence of economic development on energy is, which will be detrimental to reducing pollutant emissions and achieving green development. At the same time, high energy consumption per unit GDP also means a backward industrial structure and a low level of technological innovation. The high energy consumption per unit GDP reflects that the industrial structure is relatively backward, and the technological innovation level needs to be improved, which further reflects the low level of green development. Therefore, we agree it is reasonable to choose energy consumption per unit GDP as the indicator of green development. What is worth noting is that the energy consumption is calculated as regional comprehensive terminal energy consumption by four categories of coal, oil, natural gas and electricity, heat, and other energy. The reason why this paper picked terminal energy consumption is that it can truly reflect the actual energy consumption of economic and social development and people’s life.

(2) Core explanatory variable. We picked the digital inclusive finance index ( df ) published by Peking University Internet Finance Research Center over the years as the proxy variable of digital finance. This index is synthesized since financial service data provided by Ant Financial includes three dimensions: breadth of coverage, depth of use, and digitalization, which can systematically and comprehensively measure the development degree of digital finance [ 58 ].

(3) Mediator variables. According to Hypothesis 3, energy structure, industrial upgrading, and technological progress are three mediator variables. Among them, the energy structure is represented by the proportion of coal consumption ( cp ), and the reduction of the proportion of coal consumption will help promote the green development of the region. Industrial upgrading ( is ) referring to Linghui Fu [ 59 ], is represented by the advanced index of industrial structure calculated by the cosine method. Technological progress ( ti ) is represented by the expenditure on science and technology in fiscal expenditure.

(4) Control variables. To effectively avoid the possible estimation bias caused by omitted variables and to control as many factors as possible that affect green development, the following control variables are selected from the aspects of industrial structure, opening to the outside world, environmental regulation, transportation, etc. by referring to relevant theories and references. Industrial structure ( scbz ), measured by the proportion of tertiary industry; population density ( rkmd ), by the ratio of resident population to administrative area; opening to the outside world ( wstz ), by foreign direct investment; ecological environment ( ldmj ), by regional green space area; environmental regulation ( hbzc ), by environmental protection expenditure in fiscal expenditure; transportation ( rjgllc ), measured by road mileage per capita.

4.3. Data Sources

This paper takes 30 provincial-level units in China as samples, the Tibet, Hong Kong, Macao, and Taiwan excluded due to the lack of data. Green development mainly comes from the China Statistical Yearbook ( http://www.stats.gov.cn/tjsj/ndsj/ , accessed on 26 June 2022), the China Energy Statistical Yearbook, and regional energy balance tables ( https://data.cnki.net/yearbook/Single/N2022060061 , accessed on 6 July 2022). The digital financial index comes from Peking University Internet Finance Research Center ( https://idf.pku.edu.cn/ , accessed on 13 August 2022). The remaining economic and social statistics mainly come from statistical yearbooks and statistical bulletins of various provinces, autonomous regions, and municipalities. The air pollution data of robustness test are obtained from the online monitoring and analysis platform of China air quality ( https://www.aqistudy.cn/ , accessed on 26 August 2022). In addition, regarding the research period, taking full account of the accessibility, coherence, and authority of each variable data, the research period is limited to 2013–2020.

5. The Characteristics of Digital Finance and Green Development

5.1. spatial and temporal characteristics.

To have a comprehensive and systematic understanding of the current situation of digital finance and green development, 2013 and 2020 were selected to analyze the evolution of the spatiotemporal pattern with the help of the natural discontinuity point grading method. In the process of data analysis, we particularly emphasize the visual expression of data to obtain comprehensive spatial analysis results. The results are shown in Figure 2 .

The spatiotemporal pattern characteristics of digital finance and green development. ( a – c ) represents digital finance, and ( d – f ) represents green development.

From the perspective of digital finance, the units with high levels in 2013 are mainly concentrated in the eastern region, such as Shanghai, Beijing, Zhejiang, Guangdong, Fujian, etc., while the level of digital finance in the central and western regions is relatively low, such as Qinghai, Guizhou, Gansu, Ningxia, Yunnan, etc. By 2020, the overall spatial pattern has not changed, but the digital finance development level of all provinces, regions, and municipalities has been significantly improved, especially the units in the eastern and central regions, such as Shanghai, Beijing, Jiangsu, Anhui, Henan, Jiangxi, etc. Among them, Shanghai’s digital finance development level is the highest and the improvement is the largest, rising from 222.14 in 2013 to 431.93, while the level of digital finance in Inner Mongolia, Heilongjiang, Xinjiang, Liaoning, Jilin, etc. is low, and the promotion is slow, with a small growth rate. The characteristics of this time-space pattern indicate that the level of economic and social development is the basis for the development of digital finance. A higher level of economic and social development can effectively promote the rapid development of digital finance. In contrast, in the backward areas of economic and social development, digital finance lacks the impetus for development, which inevitably leads to a low level of development.

Green development and digital finance have similar spatial characteristics. As the green development level is represented by energy consumption per unit of GDP, it is a negative indicator. Therefore, it can be considered that the southeast region has low energy consumption per unit of GDP and a high green development level, while the northwest region has high energy consumption per unit of GDP and a low green development level. In 2013, Beijing, Jiangsu, Guangdong, Zhejiang, Fujian, and other provinces and cities led the country in green development, while Ningxia, Qinghai, Xinjiang, Guizhou, Shanxi, etc. obviously lagged. In 2020, the overall pattern did not change, but the energy consumption per unit of GDP of most provinces, autonomous regions, and municipalities decreased significantly, indicating that the level of green development is constantly improving. Among them, Guizhou, Shanxi, Sichuan, Hubei, Qinghai, and other central and western provinces, autonomous regions, and municipalities showed outstanding performance. It is worth noting that some provincial units did not show a good trend in green development. The energy consumption per unit of GDP did not decrease but increased, such as in Inner Mongolia, Ningxia, Liaoning, Heilongjiang, and Tianjin. Therefore, these provinces, autonomous regions, and municipalities still have great space and potential in saving energy and reducing consumption for realizing green transformation. Overall, the southeast of China is an economically developed area with a high level of production technology. Although it has a large energy consumption, compared with GDP, the energy consumption per unit GDP is low. However, the northwest and northeast regions are backward in economic development and low in production technology. Although the energy consumption is small, the unit GDP is still high.

5.2. Spatial Trend Analysis

To deeply explore the spatial change trend of digital finance and green development in the two directions of “east-west” and “north-south”, a trend analysis was conducted by ArcGIS10.6. Figure 3 a represents the spatial change trend of digital finance, while Figure 3 b represents the spatial change trend of green development. The x -axis represents the east-west direction, the y -axis represents the north-south direction, and the z -axis represents the level of digital finance or green development. We used the spatial trend projection line for analysis. Results are shown in Figure 3 .

Analysis of the spatial trend of digital finance and green development.

We can see from Figure 3 a that, in 2013, the east-west projection trend line shows that the development level of digital finance gradually decreases from east to west and has a linear trend. The north-south projection trend line shows that the development level of the south is high and that of the north is low. By 2020, the trend lines in both directions begin to show a downward U-shaped trend, especially in the north-south direction. The change of this trend mainly lies in the obvious improvement in the digital financial level of some provinces, autonomous regions, and municipalities in the east and central China. It directly increases the projection value of the middle position. Looking from Figure 3 b, in 2013, the east-west projected trend line indicates that the western region had high energy consumption per unit of GDP and low green development level, while the opposite is true in the east and middle. From south to north, the energy consumption per unit of GDP in the north is high and the level of green development is low, while the opposite is true in the south. By 2020, the overall trend of east-west and north-south directions does not change significantly, but the location of the projected trend line is closer to the z -axis due to the general reduction of energy consumption per unit of GDP.

6. Empirical Tests

6.1. the benchmark regression results.

Table 1 reports the regression results of the effect of digital finance on green development. Columns (1)~(2) belong to mixed cross-section regression, and columns (3)~(6) belong to dual fixed effect regression. To ensure the robustness of the results, the models without and with control variables are estimated separately.

Benchmark regression results on the impact of digital finance on green development.

* p < 0.1, ** p < 0.05, *** p < 0.01. The significance level in the following table is the same as that in this table.

The results showed that the causal relationship between digital finance and green development maintains a good negative robustness in different estimation models, and digital finance helps to significantly reduce energy consumption per unit of GDP, thus promoting green development. Therefore, digital finance has “green attributes” for economic development, which verifies Hypothesis 1. By gradually adding control variables, it is found that the estimated coefficient of digital finance on green development is stable at about 0.6, that is, if the development level of digital finance increases by 1%, the energy consumption per unit GDP will decrease by 0.6% at least. The reason for this result can be considered that digital finance has effectively reduced the carbon emissions of the financial industry and its related industries, improved the carbon emission efficiency, and has important significance and value for green development.

6.2. Analysis of Heterogeneity

Due to the vast territory of China, there are great differences in digitalization process, industrial structure, energy utilization, and economic volume among different regions. Therefore, digital finance may have heterogeneous effects on green development. Based on this, this paper tried to analyze it from different types, different regions, and the data structure itself. The results are shown in Table 2 .

Heterogeneity test of the impact of digital finance on green development.

** p < 0.05, *** p < 0.01.

(1) Digital finance has multi-dimensional and diversified characteristics. To systematically study the impact of digital finance on green development, it is divided into three dimensions: breadth of coverage ( cb ), depth of use ( ud ), and degree of digitalization ( dl ). Columns (1)~(3) showed that all three dimensions of digital finance can reduce energy consumption per unit of GDP to varying degrees, thus boosting green development. The magnitude of impact from high to low is the degree of digitization, breadth of coverage, and depth of use. The reason for this result is that the degree of digitalization is the basis of digital finance. The level of digitalization directly affects and determines the development level of digital finance. Therefore, the degree of digitalization is an important factor affecting the role of digital finance. In contrast, coverage and depth of use are based on the degree of digitization, so they are less effective than the degree of digitization. Thus, it can be seen that the development of digital finance requires not only the expansion of coverage and the realization of in-depth excavation, but also, more importantly, digital financial infrastructure and the digitalization level of relevant supporting software and hardware.

(2) According to the differences in human geography, sub-regional tests were conducted from the east, central and western regions, as well as the south and the north. Columns (4)~(5) are listed as the subsample estimation results of the eastern and central and western regions, and it is found that the impact of digital finance on green development is slightly stronger in the eastern region than in the central and western regions. The reason may be that digital finance in the eastern region is relatively high and the digital financial service system is relatively complete, which can provide more comprehensive and detailed green financial services for economic development, thus producing a more significant green growth effect. In addition, Columns (6)~(7) listed the estimation results of subsamples in the north and south, and the results showed that the role of digital finance in green development in the north is greater than that in the south. The possible reasons lie in the high proportion of industry, especially heavy industry in the north, where the energy consumption is higher than in the south. Therefore, the development of digital finance plays a more significant role in reducing energy consumption per unit of GDP and improving the level of green development in the north.

(3) To comprehensively describe the conditional distribution trend of digital finance to green development from the data structure itself, with reference to Wei Guo [ 60 ], the quantile regression method is introduced. By using the self-help method, we construct a covariance matrix to estimate models from 0.1 quantile to 0.9 quantile, which includes digital finance and its breadth of coverage, depth of use, and degree of digitization. The results are shown in Figure 4 . Overall, digital finance and its three dimensions have a significant negative impact on energy consumption per unit of GDP, which is consistent with the estimated conclusions above. However, it is worth noting that the quantile regression coefficients of digital finance on green development begin to increase after 0.8 quantile, and the influence of the right end of the conditional distribution is greater than that of the middle and left. It was indicated that in a few areas with a higher level of green development, digital finance does not show a significant effect on reducing energy consumption. That is, digital finance will play a more prominent role in areas with a low level of green development, which fully reflects the universal characteristics of inclusive growth of digital finance. The possible reason for this result is that regions with high levels of digital finance development are often also regions with advanced economic and social development. These regions have advanced production technology and experience, and strict environmental regulations. Therefore, the role of digital finance in reducing consumption in these regions is relatively small. In contrast, regions with low levels of digital finance development are often backward regions, which do not have high production technology and environmental regulation. Therefore, the consumption reduction effect of digital finance is more obvious.

Quantile regression results of the impact of digital finance on green development.

6.3. Analysis of Spatial Effects

Table 3 showed the results of spatial correlation tests and spatial econometric model selections. Firstly, we measured the Global Moran’s I index of digital finance and green development separately. The results showed that both passed the significance test each year, indicating that both have significant positive spatial correlations, which creates conditions for the use of spatial econometric models to estimate the spillover effect of digital finance on green development. Secondly, we selected the spatial econometric models. Lagrange Multiplier Test and Robust Lagrange Multiplier Test showed that the spatial lag model has better adaptability than the spatial error model. The Likelihood-ratio Test shows that the spatial Durbin model cannot be simplified to spatial lag and spatial error model, and the dual fixed effect is better than the time or individual fixed effect. Therefore, the Dubin model with dual fixed effects is chosen. The estimation results were shown in Table 4 . We took the estimation results of the Dubin model under dual fixed effects as an example to illustrate in detail. Meanwhile, the results of the spatial lag and spatial error models were also put into the table to verify the robustness of the results. Each model uses two kinds of matrices, spatial contiguity weights, and nearest neighbors weights.

Spatial correlation and econometric model selection tests.

Estimated results of the spatial econometrics for the digital finance and green development.

* p < 0.1, ** p < 0.05, *** p < 0.01.

The results showed that the estimation results of the spatial econometric models considering spatial relationships were similar to those of the general panel model, and digital finance still shows a positive impact on green development by reducing energy consumption per unit of GDP. Moreover, the spatial lag terms of green development ( W*lngd ) all passed the significance test in both the spatial Dubin and spatial Lag models, indicating that the positive spillover effect of green development between regions is obvious, and the full play of this effect is conducive to the reduction of energy consumption and high-quality economic development for the entire area. However, the spatial lag term of digital finance ( W*lndf ) does not pass the significance test, indicating that the spillover effect of digital finance on green development is not obvious, that is, digital finance can effectively improve the level of green development in the local region, but does not show a significant effect on the green development of surrounding areas, which verifies Hypothesis 2. The possible reason for this result is that digital finance, as an advanced financial service, is also subject to the invisible influence of regional and urban boundaries. Especially in China, administrative divisions and the resulting market segmentation may limit the play of digital financial spillover effects. Therefore, how to effectively eliminate the regional differences in digital finance, accelerate the flow of financial elements, and improve the level of digital financial infrastructure will be the key issues to promote the effective play of digital financial spillovers.

6.4. Robustness and Endogeneity Tests

To improve the credibility of the empirical test results, this paper adopts three methods: replacing the core explanatory variables, replacing the explained variables, and simultaneously replacing the core explanatory variables and the explained variables. The results were shown in Table 5 .

The robustness and endogenous results of digital finance affecting green development.

* p < 0.1, *** p < 0.01.

First, we selected the air quality index ( aqi ) as one of the explained variables. Air quality is closely related to energy consumption, which may produce various air pollutants, thus affecting the level of air quality. At the same time, air quality is also an important basis for evaluating the green and sustainable development of a regional economy. Column (1) showed that digital finance can significantly reduce the air quality index. Since the smaller the air quality index, the better it is, it can be considered that digital finance can help to enhance and improve air quality. Moreover, we also selected the Greenness Index of economic growth ( gi ) from the China Green Development Index Report published by Beijing Normal University as an alternative variable. The index emphasizes the green efficiency of industrial development and carries out a comprehensive evaluation by integrating various indices of the three industries. Column (2) showed that digital finance has a significant positive impact on the greenness of economic growth, indicating that it helps to improve the green efficiency of industrial development.

Firstly, digital economy ( de ) is used as the alternative variable of digital finance. Digital economy and digital finance have a close relationship, and they have a lot in common. Meanwhile, digital finance is an important part of the digital economy. Therefore, with reference to the research results of Tao Zhao [ 61 ], the development of the Internet is taken as the core index, and digital transaction indicators are added to construct a digital economic evaluation index system. Column (3) showed that the results of the digital economy on green development verified the conclusion of benchmark regression. Secondly, referring to relevant research results, we chose “the proportion of computer services and software employees” as the alternative variable of digital finance, which can reflect the development level of digital finance to a certain extent. The estimation results in column (4) were similar to those in column (3), which also indicates a significant impact on green development.

The third is to simultaneously replace the explanatory variable and the explained variable. In column (5), total energy consumption ( nyxf ) is taken as the explained variable, and Internet employees ( ie ) as the explanatory variable. In column (6), the greenness index of economic growth ( gi ) is taken as the explained variable, and Internet users ( iu ) as the explanatory variable. These replacement variables have a high correlation with the original variables, which can approximately reflect the causality. The estimation results all passed the significance test in varying degrees, which once again verified the positive effect of digital finance on green development.

Finally, to alleviate the endogenous problems caused by various reasons, we took the number of Internet users and digital finance, which lagged by one period respectively, as instrumental variables to conduct the two-stage least square method [ 62 ]. The number of Internet users can reflect the popularity of the Internet, which is highly compatible with the extensive coverage and in-depth digitalization of digital finance. Moreover, because the variable with one lag period is correlated with the current period variable, but not with the disturbance term in the predestined current period, the estimation bias caused by endogeneity can be alleviated. The results shown in columns (7) and (8) of Table 5 indicated that the green development effect of digital finance still holds. In addition, the Durbin-Wu-Hausman Test found the original hypothesis was obviously rejected and that all explanatory variables are exogenous, indicating the existence of endogenous explanatory variables. The statistical value is 9.45, and the p value is 0.002. Under-identification test (Kleibergen-Paap rk LM statistic) found the original hypothesis was obviously rejected. Weak identification test (Cragg-Donald Wald F statistic, Kleibergen-Paap Wald rk F statistic) showed that the critical value of statistics was greater than 15% or 10%, indicating that there was no weak correlation within the instrumental variables. Based on the above analysis, we believed that the selection of instrumental variables was effective and reliable.

7. Impact Mechanism Tests

Combined with the above mechanism analysis, digital finance may contribute to green development by improving the energy structure, promoting industrial upgrading, and technological progress. In the following, the mediation effect model was used to identify and judge by stepwise test, and the results were shown in Table 6 .

Test results of the mediation effect of digital finance on green development.

From the perspective of energy consumption structure, column (1) showed that digital finance can significantly reduce the proportion of coal consumption to improve the energy consumption structure. In column (2), both digital finance and energy consumption were significant, and the direct effect was of the same sign as the mediating effect. Therefore, it can be concluded that energy structure is the mediating variable of digital finance affecting green development, and it belongs to the “partial mediation”. Columns (3) and (5) showed that digital finance can significantly promote industrial upgrading and technological progress. Further, columns (4) and (6) showed that industrial upgrading and technological progress can be used as effective mediating variables for digital finance to influence green development. Therefore, the above conclusions can effectively confirm hypothesis 3.

8. Conclusions

Taking 30 provincial-level units in China as samples, this paper systematically discusses the characteristics and mechanism of digital finance and green development by using the research methods of human geography and environmental economics and makes an empirical test. The main conclusions are as follows:

(1) From the perspective of spatial and temporal patterns, digital finance, and green development were promoted to different degrees during the study period, but the inter-provincial differences remained. Digital finance is developing rapidly, especially in eastern and central China. Meanwhile, with the reduction of energy consumption per unit of GDP, the level of green development also improves in general, and the performance of the central and western regions is outstanding. Yet the energy consumption per unit of GDP is rising in some provinces and cities. In addition, from the perspective of spatial trends, digital finance and green development have different trends in the east-west and north-south directions, and the overall performance is “high in the east, low in the west, high in the south, and low in the north”.

The reasons behind this phenomenon are that the eastern region has a high level of economic and social development and advanced industrial structure and production technology, which can not only effectively promote the development of digital finance, but also achieve a high level of green development. However, the economic and social development level in the central and western regions is relatively low, the industrial structure is relatively backward, the green production technology and capacity are limited, and the impetus for green development is insufficient. Yet overall, with the implementation of the “dual carbon” strategy, the upgrading of industrial structure and technological progress, digital finance, and green development will continue to develop.

(2) Through the estimation of the econometric models, we found that digital finance can reduce energy consumption per unit of GDP, showing a significant role in promoting green development, and still obtain robust results by replacing variables. At the same time, results were heterogeneous according to different types, different regions, and different levels. In addition, the green spillover effect of digital finance is not obvious, and its role is mainly concentrated in the local area. Furthermore, through mediation model testing, it is found that digital finance can achieve green development by improving energy structure, promoting industrial upgrading, and technological progress.

Through the above results, we can find that digital finance can indeed promote green development. The possible reasons are that, on the one hand, digital finance can effectively reduce the carbon emissions of the financial industry and its related industries by improving operational efficiency. On the other hand, digital finance can provide more inclusive and green financial services and products, which are conducive to industrial upgrading, technological progress, and green development of enterprises. Finally, the positive role of digital finance in factor flow, resource allocation, and efficiency improvement will also help to achieve green development.

9. Suggestions and Discussion

The conclusions of this paper are helpful to enrich and expand the theory of environmental finance. Generally speaking, the theory of environmental finance focuses on the impact of traditional financial services on environmental protection and advocates the responsibility for environmental quality. This paper extends the environmental finance theory from traditional finance to digital finance and provides theoretical support and empirical evidence for the impact of digital finance on green development. Therefore, this paper has certain theoretical implications. At the same time, this paper will also provide management implications for local government managers in developing digital finance and promoting green development. Therefore, based on the conclusion of the foregoing research and the actual development of our country, the government, financial institutions, and enterprise put forward the following countermeasures and suggestions for the mutual promotion of digital finance and green development:

Firstly, the government should give more attention to the role of encouragement and supervision. Focusing on the goal of “carbon emission peak and carbon neutrality” and the general requirements of green and low-carbon development in the economy and society, the government should strengthen the top-level design of digital finance, establish, and improve the laws, regulations, and policy system to promote green development. Further, we suggest the government enrich the toolbox of green finance support policies, coordinate and introduce more preferential policies to support green and low-carbon development, and guide financial institutions to promote industrial upgrades. Moreover, to comprehensively enhance the ability of digital finance to support green and low-carbon development, focusing on green technology innovation, increasing the allocation of green assets, and strengthening environmental risk management are also essential. In addition, the government should also accelerate the construction of the digital financial regulatory system, improve the laws, detailed rules, and regulations of green finance, and quickly improve the regulatory regulations according to the characteristics of digital finance to avoid the absence of regulation.

Secondly, financial institutions should play the leading role of digital finance in leading green development. On the one hand, we suggest that financial institutions follow the principle of “domestic unification and international integration”, focus on energy consumption, pollution control, energy conservation, emission reduction, green technology, and other fields, constantly improve the digital financial policy and standard system, so as to provide an important guarantee for standardizing digital financial business, ensuring the commercial sustainability of green finance and promoting the green development of economy and society. On the other hand, we suggest that financial institutions coordinate and develop specialized green financial products in different regions, design specific investment plans according to the R&D cycle of green technologies and the feedback effect of enterprises, vigorously promote business innovations such as green credit, green securities, green insurance, green guarantee, and green funds, etc. Moreover, they should also improve multi-level green financial products and a unified digital market system, provide more and better digital financial products and services for green and low-carbon development, and create the foundation and conditions for the green spillover effect.

Thirdly, from the perspective of enterprises, we suggest they could play the main role in realizing green transformation through digital finance. Enterprises are the main body of the application of digital financial products, but also the main position to achieve green transformation and development. Therefore, it is suggested to build a tripartite information-sharing platform and communication and cooperation mechanism of “government-bank-enterprise”, to smooth the interconnection of capital, technology, talents, and markets, and help enterprises better integrate into the capital chain, value chain, and industrial chain of digital finance. On the one hand, enterprises should make full use of digital financial products and platforms to improve production technology and promote green transformation and environmental benefits. On the other hand, enterprises should also pay attention to industry-research cooperation, set up green digital financial construction teams, and train professionals who understand not only financial knowledge but also digital and environmental protection technology, to lay a solid foundation for the high-quality development of green financial business.

Finally, this article basically achieved the set goals and completed tests of hypotheses. under the guidance of the environmental finance theory and related theories, and with reference to the latest research results, we selected provincial units in China as the research samples and obtained credible conclusions by selecting appropriate data and building models. However, we also realized that there are some deficiencies in this paper. The sample selection lacks attention to other administrative levels. For example, regional level, city level, enterprise level, etc. In addition, due to data availability and model design requirements, more possible factors were not considered when selecting intermediate variables. The impact of digital finance on green development is complex and diverse, which needs further analysis and verification. In the future, we think there are three warm tips for future researchers. First, the scope of digital finance can be extended to coverage, depth of use, and other aspects. Second, this paper reflects green development by using energy consumption per unit GDP. In future research, attention can be paid to the water environment, soil environment, air environment, etc. These are important indicators reflecting the level of green development. Third, we suggest that scholars explore how digital finance plays a role in green development at the enterprise level.

Acknowledgments

The authors would like to thank the editors and anonymous reviewers for their thoughtful and constructive comments.

Funding Statement

This paper was supported by the Fundamental Research Funds for the Provincial Universities of Zhejiang (SJWZ2023001).

Author Contributions

Ideas, conceptualization, R.Z.; methodology, software, validation, formal analysis, writing—original draft preparation, R.Z., M.Z., and C.Z.; investigation, resources, data curation, K.M., M.Z., and C.Z. All authors have read and agreed to the published version of the manuscript.

Institutional Review Board Statement

Not applicable.

Informed Consent Statement

Data availability statement, conflicts of interest.

The authors declare no conflict of interest.

Publisher’s Note: MDPI stays neutral with regard to jurisdictional claims in published maps and institutional affiliations.

A generative AI reset: Rewiring to turn potential into value in 2024

It’s time for a generative AI (gen AI) reset. The initial enthusiasm and flurry of activity in 2023 is giving way to second thoughts and recalibrations as companies realize that capturing gen AI’s enormous potential value is harder than expected .

With 2024 shaping up to be the year for gen AI to prove its value, companies should keep in mind the hard lessons learned with digital and AI transformations: competitive advantage comes from building organizational and technological capabilities to broadly innovate, deploy, and improve solutions at scale—in effect, rewiring the business  for distributed digital and AI innovation.

About QuantumBlack, AI by McKinsey

QuantumBlack, McKinsey’s AI arm, helps companies transform using the power of technology, technical expertise, and industry experts. With thousands of practitioners at QuantumBlack (data engineers, data scientists, product managers, designers, and software engineers) and McKinsey (industry and domain experts), we are working to solve the world’s most important AI challenges. QuantumBlack Labs is our center of technology development and client innovation, which has been driving cutting-edge advancements and developments in AI through locations across the globe.

Companies looking to score early wins with gen AI should move quickly. But those hoping that gen AI offers a shortcut past the tough—and necessary—organizational surgery are likely to meet with disappointing results. Launching pilots is (relatively) easy; getting pilots to scale and create meaningful value is hard because they require a broad set of changes to the way work actually gets done.

Let’s briefly look at what this has meant for one Pacific region telecommunications company. The company hired a chief data and AI officer with a mandate to “enable the organization to create value with data and AI.” The chief data and AI officer worked with the business to develop the strategic vision and implement the road map for the use cases. After a scan of domains (that is, customer journeys or functions) and use case opportunities across the enterprise, leadership prioritized the home-servicing/maintenance domain to pilot and then scale as part of a larger sequencing of initiatives. They targeted, in particular, the development of a gen AI tool to help dispatchers and service operators better predict the types of calls and parts needed when servicing homes.

Leadership put in place cross-functional product teams with shared objectives and incentives to build the gen AI tool. As part of an effort to upskill the entire enterprise to better work with data and gen AI tools, they also set up a data and AI academy, which the dispatchers and service operators enrolled in as part of their training. To provide the technology and data underpinnings for gen AI, the chief data and AI officer also selected a large language model (LLM) and cloud provider that could meet the needs of the domain as well as serve other parts of the enterprise. The chief data and AI officer also oversaw the implementation of a data architecture so that the clean and reliable data (including service histories and inventory databases) needed to build the gen AI tool could be delivered quickly and responsibly.

Our book Rewired: The McKinsey Guide to Outcompeting in the Age of Digital and AI (Wiley, June 2023) provides a detailed manual on the six capabilities needed to deliver the kind of broad change that harnesses digital and AI technology. In this article, we will explore how to extend each of those capabilities to implement a successful gen AI program at scale. While recognizing that these are still early days and that there is much more to learn, our experience has shown that breaking open the gen AI opportunity requires companies to rewire how they work in the following ways.

Figure out where gen AI copilots can give you a real competitive advantage

The broad excitement around gen AI and its relative ease of use has led to a burst of experimentation across organizations. Most of these initiatives, however, won’t generate a competitive advantage. One bank, for example, bought tens of thousands of GitHub Copilot licenses, but since it didn’t have a clear sense of how to work with the technology, progress was slow. Another unfocused effort we often see is when companies move to incorporate gen AI into their customer service capabilities. Customer service is a commodity capability, not part of the core business, for most companies. While gen AI might help with productivity in such cases, it won’t create a competitive advantage.

To create competitive advantage, companies should first understand the difference between being a “taker” (a user of available tools, often via APIs and subscription services), a “shaper” (an integrator of available models with proprietary data), and a “maker” (a builder of LLMs). For now, the maker approach is too expensive for most companies, so the sweet spot for businesses is implementing a taker model for productivity improvements while building shaper applications for competitive advantage.

Much of gen AI’s near-term value is closely tied to its ability to help people do their current jobs better. In this way, gen AI tools act as copilots that work side by side with an employee, creating an initial block of code that a developer can adapt, for example, or drafting a requisition order for a new part that a maintenance worker in the field can review and submit (see sidebar “Copilot examples across three generative AI archetypes”). This means companies should be focusing on where copilot technology can have the biggest impact on their priority programs.

Copilot examples across three generative AI archetypes

• “Taker” copilots help real estate customers sift through property options and find the most promising one, write code for a developer, and summarize investor transcripts.
• “Shaper” copilots provide recommendations to sales reps for upselling customers by connecting generative AI tools to customer relationship management systems, financial systems, and customer behavior histories; create virtual assistants to personalize treatments for patients; and recommend solutions for maintenance workers based on historical data.
• “Maker” copilots are foundation models that lab scientists at pharmaceutical companies can use to find and test new and better drugs more quickly.

Some industrial companies, for example, have identified maintenance as a critical domain for their business. Reviewing maintenance reports and spending time with workers on the front lines can help determine where a gen AI copilot could make a big difference, such as in identifying issues with equipment failures quickly and early on. A gen AI copilot can also help identify root causes of truck breakdowns and recommend resolutions much more quickly than usual, as well as act as an ongoing source for best practices or standard operating procedures.

The challenge with copilots is figuring out how to generate revenue from increased productivity. In the case of customer service centers, for example, companies can stop recruiting new agents and use attrition to potentially achieve real financial gains. Defining the plans for how to generate revenue from the increased productivity up front, therefore, is crucial to capturing the value.

Upskill the talent you have but be clear about the gen-AI-specific skills you need

By now, most companies have a decent understanding of the technical gen AI skills they need, such as model fine-tuning, vector database administration, prompt engineering, and context engineering. In many cases, these are skills that you can train your existing workforce to develop. Those with existing AI and machine learning (ML) capabilities have a strong head start. Data engineers, for example, can learn multimodal processing and vector database management, MLOps (ML operations) engineers can extend their skills to LLMOps (LLM operations), and data scientists can develop prompt engineering, bias detection, and fine-tuning skills.

A sample of new generative AI skills needed

The following are examples of new skills needed for the successful deployment of generative AI tools:

• data scientist:
• prompt engineering
• in-context learning
• bias detection
• pattern identification
• reinforcement learning from human feedback
• hyperparameter/large language model fine-tuning; transfer learning
• data engineer:
• data wrangling and data warehousing
• data pipeline construction
• multimodal processing
• vector database management

The learning process can take two to three months to get to a decent level of competence because of the complexities in learning what various LLMs can and can’t do and how best to use them. The coders need to gain experience building software, testing, and validating answers, for example. It took one financial-services company three months to train its best data scientists to a high level of competence. While courses and documentation are available—many LLM providers have boot camps for developers—we have found that the most effective way to build capabilities at scale is through apprenticeship, training people to then train others, and building communities of practitioners. Rotating experts through teams to train others, scheduling regular sessions for people to share learnings, and hosting biweekly documentation review sessions are practices that have proven successful in building communities of practitioners (see sidebar “A sample of new generative AI skills needed”).

It’s important to bear in mind that successful gen AI skills are about more than coding proficiency. Our experience in developing our own gen AI platform, Lilli , showed us that the best gen AI technical talent has design skills to uncover where to focus solutions, contextual understanding to ensure the most relevant and high-quality answers are generated, collaboration skills to work well with knowledge experts (to test and validate answers and develop an appropriate curation approach), strong forensic skills to figure out causes of breakdowns (is the issue the data, the interpretation of the user’s intent, the quality of metadata on embeddings, or something else?), and anticipation skills to conceive of and plan for possible outcomes and to put the right kind of tracking into their code. A pure coder who doesn’t intrinsically have these skills may not be as useful a team member.

While current upskilling is largely based on a “learn on the job” approach, we see a rapid market emerging for people who have learned these skills over the past year. That skill growth is moving quickly. GitHub reported that developers were working on gen AI projects “in big numbers,” and that 65,000 public gen AI projects were created on its platform in 2023—a jump of almost 250 percent over the previous year. If your company is just starting its gen AI journey, you could consider hiring two or three senior engineers who have built a gen AI shaper product for their companies. This could greatly accelerate your efforts.

Form a centralized team to establish standards that enable responsible scaling

To ensure that all parts of the business can scale gen AI capabilities, centralizing competencies is a natural first move. The critical focus for this central team will be to develop and put in place protocols and standards to support scale, ensuring that teams can access models while also minimizing risk and containing costs. The team’s work could include, for example, procuring models and prescribing ways to access them, developing standards for data readiness, setting up approved prompt libraries, and allocating resources.

While developing Lilli, our team had its mind on scale when it created an open plug-in architecture and setting standards for how APIs should function and be built.  They developed standardized tooling and infrastructure where teams could securely experiment and access a GPT LLM , a gateway with preapproved APIs that teams could access, and a self-serve developer portal. Our goal is that this approach, over time, can help shift “Lilli as a product” (that a handful of teams use to build specific solutions) to “Lilli as a platform” (that teams across the enterprise can access to build other products).

For teams developing gen AI solutions, squad composition will be similar to AI teams but with data engineers and data scientists with gen AI experience and more contributors from risk management, compliance, and legal functions. The general idea of staffing squads with resources that are federated from the different expertise areas will not change, but the skill composition of a gen-AI-intensive squad will.

Set up the technology architecture to scale

Building a gen AI model is often relatively straightforward, but making it fully operational at scale is a different matter entirely. We’ve seen engineers build a basic chatbot in a week, but releasing a stable, accurate, and compliant version that scales can take four months. That’s why, our experience shows, the actual model costs may be less than 10 to 15 percent of the total costs of the solution.

Building for scale doesn’t mean building a new technology architecture. But it does mean focusing on a few core decisions that simplify and speed up processes without breaking the bank. Three such decisions stand out:

• Focus on reusing your technology. Reusing code can increase the development speed of gen AI use cases by 30 to 50 percent. One good approach is simply creating a source for approved tools, code, and components. A financial-services company, for example, created a library of production-grade tools, which had been approved by both the security and legal teams, and made them available in a library for teams to use. More important is taking the time to identify and build those capabilities that are common across the most priority use cases. The same financial-services company, for example, identified three components that could be reused for more than 100 identified use cases. By building those first, they were able to generate a significant portion of the code base for all the identified use cases—essentially giving every application a big head start.
• Focus the architecture on enabling efficient connections between gen AI models and internal systems. For gen AI models to work effectively in the shaper archetype, they need access to a business’s data and applications. Advances in integration and orchestration frameworks have significantly reduced the effort required to make those connections. But laying out what those integrations are and how to enable them is critical to ensure these models work efficiently and to avoid the complexity that creates technical debt  (the “tax” a company pays in terms of time and resources needed to redress existing technology issues). Chief information officers and chief technology officers can define reference architectures and integration standards for their organizations. Key elements should include a model hub, which contains trained and approved models that can be provisioned on demand; standard APIs that act as bridges connecting gen AI models to applications or data; and context management and caching, which speed up processing by providing models with relevant information from enterprise data sources.
• Build up your testing and quality assurance capabilities. Our own experience building Lilli taught us to prioritize testing over development. Our team invested in not only developing testing protocols for each stage of development but also aligning the entire team so that, for example, it was clear who specifically needed to sign off on each stage of the process. This slowed down initial development but sped up the overall delivery pace and quality by cutting back on errors and the time needed to fix mistakes.

Ensure data quality and focus on unstructured data to fuel your models

The ability of a business to generate and scale value from gen AI models will depend on how well it takes advantage of its own data. As with technology, targeted upgrades to existing data architecture  are needed to maximize the future strategic benefits of gen AI:

• Be targeted in ramping up your data quality and data augmentation efforts. While data quality has always been an important issue, the scale and scope of data that gen AI models can use—especially unstructured data—has made this issue much more consequential. For this reason, it’s critical to get the data foundations right, from clarifying decision rights to defining clear data processes to establishing taxonomies so models can access the data they need. The companies that do this well tie their data quality and augmentation efforts to the specific AI/gen AI application and use case—you don’t need this data foundation to extend to every corner of the enterprise. This could mean, for example, developing a new data repository for all equipment specifications and reported issues to better support maintenance copilot applications.
• Understand what value is locked into your unstructured data. Most organizations have traditionally focused their data efforts on structured data (values that can be organized in tables, such as prices and features). But the real value from LLMs comes from their ability to work with unstructured data (for example, PowerPoint slides, videos, and text). Companies can map out which unstructured data sources are most valuable and establish metadata tagging standards so models can process the data and teams can find what they need (tagging is particularly important to help companies remove data from models as well, if necessary). Be creative in thinking about data opportunities. Some companies, for example, are interviewing senior employees as they retire and feeding that captured institutional knowledge into an LLM to help improve their copilot performance.
• Optimize to lower costs at scale. There is often as much as a tenfold difference between what companies pay for data and what they could be paying if they optimized their data infrastructure and underlying costs. This issue often stems from companies scaling their proofs of concept without optimizing their data approach. Two costs generally stand out. One is storage costs arising from companies uploading terabytes of data into the cloud and wanting that data available 24/7. In practice, companies rarely need more than 10 percent of their data to have that level of availability, and accessing the rest over a 24- or 48-hour period is a much cheaper option. The other costs relate to computation with models that require on-call access to thousands of processors to run. This is especially the case when companies are building their own models (the maker archetype) but also when they are using pretrained models and running them with their own data and use cases (the shaper archetype). Companies could take a close look at how they can optimize computation costs on cloud platforms—for instance, putting some models in a queue to run when processors aren’t being used (such as when Americans go to bed and consumption of computing services like Netflix decreases) is a much cheaper option.

Build trust and reusability to drive adoption and scale

Because many people have concerns about gen AI, the bar on explaining how these tools work is much higher than for most solutions. People who use the tools want to know how they work, not just what they do. So it’s important to invest extra time and money to build trust by ensuring model accuracy and making it easy to check answers.

One insurance company, for example, created a gen AI tool to help manage claims. As part of the tool, it listed all the guardrails that had been put in place, and for each answer provided a link to the sentence or page of the relevant policy documents. The company also used an LLM to generate many variations of the same question to ensure answer consistency. These steps, among others, were critical to helping end users build trust in the tool.

Part of the training for maintenance teams using a gen AI tool should be to help them understand the limitations of models and how best to get the right answers. That includes teaching workers strategies to get to the best answer as fast as possible by starting with broad questions then narrowing them down. This provides the model with more context, and it also helps remove any bias of the people who might think they know the answer already. Having model interfaces that look and feel the same as existing tools also helps users feel less pressured to learn something new each time a new application is introduced.

Getting to scale means that businesses will need to stop building one-off solutions that are hard to use for other similar use cases. One global energy and materials company, for example, has established ease of reuse as a key requirement for all gen AI models, and has found in early iterations that 50 to 60 percent of its components can be reused. This means setting standards for developing gen AI assets (for example, prompts and context) that can be easily reused for other cases.

While many of the risk issues relating to gen AI are evolutions of discussions that were already brewing—for instance, data privacy, security, bias risk, job displacement, and intellectual property protection—gen AI has greatly expanded that risk landscape. Just 21 percent of companies reporting AI adoption say they have established policies governing employees’ use of gen AI technologies.

Similarly, a set of tests for AI/gen AI solutions should be established to demonstrate that data privacy, debiasing, and intellectual property protection are respected. Some organizations, in fact, are proposing to release models accompanied with documentation that details their performance characteristics. Documenting your decisions and rationales can be particularly helpful in conversations with regulators.

In some ways, this article is premature—so much is changing that we’ll likely have a profoundly different understanding of gen AI and its capabilities in a year’s time. But the core truths of finding value and driving change will still apply. How well companies have learned those lessons may largely determine how successful they’ll be in capturing that value.

The authors wish to thank Michael Chui, Juan Couto, Ben Ellencweig, Josh Gartner, Bryce Hall, Holger Harreis, Phil Hudelson, Suzana Iacob, Sid Kamath, Neerav Kingsland, Kitti Lakner, Robert Levin, Matej Macak, Lapo Mori, Alex Peluffo, Aldo Rosales, Erik Roth, Abdul Wahab Shaikh, and Stephen Xu for their contributions to this article.

This article was edited by Barr Seitz, an editorial director in the New York office.

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Corporate debt, boom-bust cycles, and financial crises.

Using a new dataset on sectoral credit exposures covering financial and non-financial sectors in 115 economies over the period 1940–2014, we document the following evidence that corporate debt plays a key role in explaining boom-bust cycles, financial crises, and slow macroeconomic recoveries: (i) corporate debt accounts for two thirds of the aggregate credit expansion before crises and three quarters of total nonperforming loans during the bust; (ii) expansions in corporate debt predict crises similarly to household debt; (iii) a measure of imbalance in credit growth flowing disproportionately to some sectors, such as construction and non-bank financial intermediation, is associated with crises; and (iv) the recovery from financial crises is slower after a boom in corporate debt, especially when backed by procyclical collateral values, due to higher nonperforming loans.

The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research, the ECB, or Eurosystem. Müller acknowledges support from a Singapore MOE PYP grant (WBS A-0003319-01-00 and A-0003319-02-00) and Tier 1 grant (A-8001749-00-00). We would like to thank Matt Baron, Sebastian Doerr, Martin Kornejew, Holger Mueller, Moritz Schularick, Emil Verner, Noah Williams, as well as seminar participants at the BIS, HBS, IMF, Norges Bank, ECB, NUS, University of Maryland, Federal Reserve Board, and Finance in the Tuscan Hills for their valuable comments. Xiangyu Qiu provided excellent research assistance.

In addition to Harvard University, in the past three years, I received significant financial support from the Federal Reserve Bank of Boston, Superintendency of Banking and Insurance of Peru, Long Term Investors @ UniTo, AfricInvest, and Carlyle AlpInvest.

MARC RIS BibTeΧ

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• Published: 14 March 2024

Does corporate digital transformation restrain ESG decoupling? Evidence from China

• Xiangyu Chen 1 ,
• Peng Wan 2 ,
• Zhefeng Ma 2 &
• Yu Yang 2  

Humanities and Social Sciences Communications volume  11 , Article number:  407 ( 2024 ) Cite this article

36 Accesses

• Business and management
• Environmental studies

This paper empirically examines the efficacy of corporate digital transformation on a firm’s environmental, social, and governance (ESG) decoupling. Adopting the text analysis method and using a sample of Chinese A-share listed firms from 2010 to 2019, this paper finds that digital transformation can significantly alleviate ESG decoupling, and this relationship persists after robustness tests. Mechanism analysis reveals that digital transformation reduces ESG decoupling by improving information processing ability and relieving information asymmetry. The relationship between corporate digital transformation and ESG decoupling is stronger among companies in eastern China and firms that do not follow GRI guidance. The economic consequence analysis suggests that corporate digital transformation promotes firms’ high-quality development by reducing ESG decoupling. This study helps reveal corporate digital transformation’s empowering role and governance role in ESG decoupling and contributes to the growing literature on ESG decoupling and corporate digital transformation.

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Environmental, social, and governance (ESG) issues have attracted widespread attention from the practical and academic communities, and firms have disclosed various kinds of ESG reports to satisfy the stakeholders’ expectations (Clarkson et al., 2013 ; Khan et al., 2015 ). ESG information complements financial statements, releasing altruistic signals about the company and establishing an excellent reputation to stakeholders (Godfrey, 2005 ). Compared to mandatory financial information, corporate management has more flexibility in preparing ESG information and more discretion in disclosing ESG reports. Management may adopt symbolic misrepresentation tactics or exaggerate ESG performance to enhance legitimacy, resulting in “inconsistency between words and actions” of ESG (Marquis and Qian, 2014 ). This reporting phenomenon, showing the disparity between external ESG reporting and practical ESG actions, is called ESG decoupling (Delmas and Burbano, 2011 ; Tashman et al., 2019 ; Eliwa et al., 2023 ). Previous studies generally viewed ESG decoupling as an unethical behavior affected by management’s egoism (Hawn and Ioannou, 2016 ), inevitably reducing information transparency and firm value (Du, 2015 ; García-Sánchez et al., 2021 ). Hence, how to govern ESG decoupling is an urgent issue attracting growing attention from scholars and firms’ stakeholders.

Scholars have identified several determinants of ESG decoupling, including regulatory contexts, market pressures, firm characteristics, corporate governance factors, and individual psychological drivers (Marquis and Qian, 2014 ; Kim and Lyon, 2015 ; Luo et al., 2017 ; Sauerwald and Su, 2019 ; García-Sánchez et al., 2021 ; Shahab et al., 2021 ; Zhang, 2022 ; Gull et al., 2023 ; Xia et al., 2023 ). However, there is still a lack of literature on how to inhibit enterprise ESG decoupling (Velte, 2023 ), and we know little about the digital technology forces that curb ESG decoupling. With the mass adoption of digital technologies, firms integrate various digital technologies into all parts of their business, so-called corporate digital transformation (Vial, 2019 ). Digital transformation affects not only firms’ production and operation but also corporate information generation and communication (Bertani et al., 2020 ; De Sousa Jabbour et al., 2018 ). Taking Big Data technologies as an example, Zhu ( 2019 ) argues digital technologies play a governance role in reducing management opportunistic behavior. Therefore, this paper focuses on the digital technology forces and investigates whether corporate digital transformation can restrain ESG decoupling.

The digital technology revolution is powerfully driving socioeconomic development in China. China has a unique political, economic, and cultural environment that has profoundly impacted the development of its emerging digital economy. The Chinese government attaches great importance to digital transformation and innovation, introduces a series of policies and measures to promote the development of the digital economy, and actively explores innovation paths and models suited to its national conditions. For example, the Chinese government issued the Digital Economy Development Strategy Outline, the first overall digital economy strategy at the national level, in 2018. As disclosed in China’s Digital Economy Development Report 2023, China made a breakthrough in digital economy development in 2022, touching 50.2 trillion yuan ($6.9 trillion) and accounting for 41.5% of the country’s GDP. In addition, China’s 14th Five-Year Plan outlines that digital transformation will drive overall changes in production, lifestyle, and governance, thus elevating digital transformation to a national strategy. The digital economy, driven by social development trends and national policy support, has become an essential pillar of China’s economic transformation. Firms implement sustainable digital transformation to adapt to this changing environment, ensure business continuity, and cope with development crises (Reuschl et al., 2022 ).

We postulate that corporate digital transformation can restrain ESG decoupling by improving managers’ ability to prepare ESG reports and reducing managers’ subjective motivation to manipulate ESG reports. Specifically, Digital technologies help firms collect, process, and communicate information (Wu et al., 2021 ). It will improve firms’ internal control and strengthen ESG information quality, consistent with internal control’s objective of providing high-quality external reporting in the COSO report. Furthermore, digital transformation increases more stakeholders’ monitoring over firms and reduces monitoring costs. Hence, corporate digital transformation may reduce management’s engagement in information manipulation and thus restrain ESG decoupling.

Using Chinese A-share listed companies from 2010 to 2019 and adopting the text analysis method to measure corporate digital transformation, this paper examines the nexus between corporate digital transformation and ESG decoupling and finds that corporate digital transformation can substantially alleviate ESG decoupling. Mechanism analysis shows that improving a firm’s information processing ability and restraining information asymmetry mediate corporate digital transformation’s effect on ESG decoupling. Further research suggests that the relation between corporate digital transformation and ESG decoupling is more pronounced in the firms located in Chinese eastern regions and in firms that do not follow GRI standards. Ultimately, our economic consequence analysis suggests corporate digital transformation helps firms’ high-quality development by reducing ESG decoupling.

The contributions of this paper are as follows: first, it contributes to the determinants of ESG decoupling. Existing literature has studied country-specific and firm-specific determinants of ESG decoupling (Velte, 2023 ), mainly focusing on regulatory/monitoring contexts, market pressures, firm characteristics, corporate governance factors, and individual psychological traits (Marquis and Qian, 2014 ; Kim and Lyon, 2015 ; Luo et al., 2017 ; Sauerwald and Su, 2019 ; García-Sánchez et al. 2021 ; Shahab et al., 2021 ; Zhang, 2022 ; Gull et al., 2023 ; Xia et al., 2023 ). However, few works have studied the role of the technological forces on ESG decoupling. With digital technology’s increasing impacts on firms’ behavior, whether corporate digital transformation can restrain ESG decoupling and the mechanisms behind it has not yet been answered systematically. In response to Velte’s ( 2023 ) call for strengthening ESG decoupling research, this paper explores these questions and sheds light on one critical determinant of ESG decoupling, thereby enriching the literature in this field.

Second, this paper enriches and extends the literature on the economic consequences of corporate digital transformation. While previous literature has mainly studied digital empowerment effects from the perspectives of organizational change, organizational performance, and innovation (Vial, 2019 ; Chouaibi et al., 2022 ; Gao et al., 2023 ), this paper investigates the efficacy of digital transformation on ESG decoupling and its mechanisms from the perspective of management information disclosure, which provides an accurate understanding and assessment of corporate digital transformation’s social outcomes.

Thirdly, this paper deepens research on the relationship between digital transformation and ESG. Several studies use the Bloomberg ESG score or Huazheng ESG index to proxy for ESG performance and find that firms exhibiting high-level digital transformation increase their ESG performance (Chen and Hao, 2022 ; Lu et al., 2023 ; Fang et al., 2023 ; Wang et al., 2023 ). We deepen these studies by providing further evidence that digital transformation improves firms’ ESG disclosure quality and promotes consistency in firms’ ESG disclosures and ESG activities. We find digital transformation strengthens firms’ information processing ability, restrains information asymmetry, and restrains the gap between firms’ ESG reporting and ESG activities. Thus, we add to the literature by disentangling ESG disclosure from actual ESG activities and deepening the research on the relationship between digital transformation and ESG.

Prior literature and hypothesis

Literature review, digital transformation.

Digital transformation is a reengineering process that aims to promote operational efficiency and organizational performance via utilizing connectivity, communication, computing, and information technologies (Vial, 2019 ). Existing research finds that external environmental changes, such as financial support for digital technology, widespread application of next-generation digital technologies, updates to and modification of business model strategy, and the development needs of firms themselves, can stimulate corporate digital transformation (Warner and Wager, 2019 ; Wu et al., 2021 ; Verhoef et al., 2021 ).

A large body of research has focused on the impact of digital transformation on micro-firms. First, digital transformation is a whole-process, all-around management structure transformation that successfully transforms companies’ operations (Fitzgerald et al., 2014 ; Verhoef et al., 2021 ). Companies have reinvented customer engagement, information, and products and services through new information access, mobility, and interactivity capabilities (Berman, 2012 ). Digital technologies help create deeper consumer relationships and generate new distribution channels to develop and deliver value to the customer base (Matarazzo et al., 2021 ). Second, by integrating digital technology into firms’ production processes, production intelligence, and automation can reduce labor costs, while applying big data can predict production tasks more accurately and greatly improve productivity (Agrawal et al., 2019 ; Vial, 2019 ). Digital transformation can also improve corporate performance through the speed of digital innovation and operational efficiency (Liu et al., 2023a ) and enable firms to reduce credit financing costs and have better capital market performance (Wu et al., 2021 ; Wu et al., 2022 ; Zhou and Li, 2023 ). Third, corporate digital transformation increases research and development expenditure and promotes innovation output (Gao et al., 2023 ). Finally, firms’ digital transformation is not smooth, and the “IT paradox” (Ekata, 2012 ) may raise moral and ethical issues, such as privacy, discrimination, and workers’ rights (Etter et al., 2019 ).

The definition and theory foundation of ESG decoupling

Originating in organization studies, decoupling means the gap between symbolic policy adoption and low-quality implementation (Westphal and Zajac, 2001 ; Tilcsik, 2010 ; Luo et al., 2017 ). Applying the term “decoupling” to the corporate social responsibility (CSR) field, CSR decoupling is defined as the difference between external CSR efforts and internal CSR actions (Sauerwald & Su, 2019 ; Velte, 2023 ). ESG decoupling, which emerged with the proliferation of firms’ ESG reporting, has received significant academic attention recently (Eliwa et al., 2023 ; Liu et al., 2023b ; Di and Li, 2023 ). The concept of ESG decoupling is similar to CSR decoupling and greenwashing. However, greenwashing is a decoupling strategy for environmental issues, and CSR decoupling only covers the social and environmental dimensions (Liu et al., 2023b ). As ESG also includes governance factors, ESG decoupling is broader than greenwashing and CSR decoupling. Hence, we adopt the broader term ESG decoupling in this context and define ESG decoupling as the gap between external ESG reporting and practical ESG action (Tashman et al., 2019 ). We argue that this gap may not necessarily be caused by corporate exaggerated disclosure strategy, and it can also be attributed to factors such as firms’ weak information processing capabilities.

The legitimacy theory and asymmetric information theory provide theoretical foundations for ESG decoupling. Legitimacy theory suggests that organizations can gain legitimacy when their actions conform to social norms and principles (Suchman, 1995 ). Firms demonstrate that they behave in socially recognized, normative manners by disclosing ESG reporting that meets the stakeholders’ requirements, hence obtaining social acceptance and achieving legitimacy (Velte, 2023 ). However, managers may conduct self-impression management and overstate firms’ positive ESG image when lacking stakeholders’ monitoring. As a result, what companies allege they have done may not accurately reflect the actual situation, and firms can still maintain their legitimacy (Meyer and Rowan, 1977 ; Talpur et al., 2023 ).

The asymmetric information theory can theoretically support ESG decoupling. Asymmetric information theory proposes that different individuals have different levels of information in market economy activities, which leads them to occupy different positions in trading or decision-making, thus affecting the normal operation of the market (Akerlof, 1970 ; Spence 1973 ; Rothschild and Stiglitz, 1976 ). Similarly, in the context of ESG reporting, ESG information is voluntarily disclosed and is more challenging to evaluate and monitor than financial information. Moreover, corporate managers have more ESG information than other stakeholders. Therefore, firms may use impression management tactics to misrepresent, disguise, or exaggerate actual ESG performance and disclose information that does not reliably reflect all material aspects of ESG behavior (Tashman et al., 2019 ; Hawn and Ioannou, 2016 ), resulting in the more severe problem of information asymmetry in the ESG investment market (Sun et al., 2023 ). Hence, information asymmetry in ESG reporting can create a gap between corporate ESG reports (“saying”) and ESG practices (“doing”).

The determinants of ESG decoupling

Some scholars have studied the factors influencing ESG decoupling from multiple aspects. In the realm of regulatory/monitoring contexts influencing ESG decoupling, a synthesis of various studies provides valuable insights. The pervasiveness of a country’s institutional voids tends to increase ESG decoupling, while internationalization has the opposite effect (Tashman et al., 2019 ). Examining the impact of new environmental laws, the study by Zhao et al. ( 2022 ) reveals that board network centrality exhibits a positive correlation with over-decoupling in the pre-adoption period (2009–2014) but a negative correlation in the post-adoption period (2015–2018). Besides, a country’s absence of political rights and cross-listings reduces ESG decoupling, while a higher country corruption index increases ESG decoupling tendencies (Yu et al., 2020 ). Additionally, firms are more inclined to implement substantive ESG practices where external monitoring is expected, and external deregulation increases ESG decoupling (Marquis and Qian, 2014 ; Kim and Lyon, 2015 ).

Many scholars have studied the determinants of ESG decoupling from market pressure. Arouri et al. ( 2021 ) find that product market competition negatively impacts ESG decoupling, particularly when firms bear substantial environmental costs. Zhang ( 2022 ) documents that high analyst coverage increases a company’s visibility and helps mitigate information asymmetries between stakeholders and the company, thereby significantly reducing ESG decoupling. Furthermore, applying the GRI guidelines and ESG reporting assurance enhances the credibility of ESG reporting and reduces ESG symbolic practices (García-Sánchez et al., 2022 ).

The influence of firm characteristics on ESG decoupling has also attracted much attention from scholars. Following engagements with UNGC, private firms significantly reduce their negative ESG incident levels, while public firms fail to do so and are more likely to engage in symbolic ESG action (Li and Wu, 2020 ). Family ownership appears to be associated with lower ESG decoupling, mainly because they make decisions based on accumulated emotional legacy or socio-emotional wealth and are more ethical when informing stakeholders of their commitment to ESG (Parra-Domínguez et al., 2021 ). Furthermore, firms that are more environmentally damaging, particularly those in countries that are more exposed to scrutiny and global norms, are less likely to engage in greenwashing (Marquis et al., 2016 ).

Research on the relationship between corporate governance and ESG decoupling has also yielded valuable insights. CSR board committees have been found to mitigate ESG decoupling. Specifically, larger CSR committee size, greater independence of committee members, and longer member tenure have been associated with reduced ESG decoupling (Gull et al., 2023 ). Similarly, Eliwa et al. ( 2023 ) found that firms with a more gender-diversified board of directors tend to engage less in ESG decoupling.

The research on individual psychology of management also complemented the study on determinants of ESG decoupling. Overconfident CEOs may exaggerate the perceived ability to affect ESG initiatives, leading them to disclose ESG information in an overly optimistic manner, and more powerful CEOs focus on short-term benefits, all of which exacerbate ESG decoupling (Shahab et al., 2021 ; Sauerwald and Su, 2019 ). Narcissistic CEOs are more inclined to pay attention to externally oriented ESG activities rather than internal guidance of ESG activities (Al-Shammari et al., 2019 ). In addition, entrenched managers tend to decouple ESG disclosure and performance (García-Sánchez et al., 2020 ).

Existing studies have examined the influencing factors of ESG decoupling from the perspectives of the monitoring context, market pressure, firm characteristics, corporate governance, individual psychology, etc. However, there are still several unresolved issues in the existing literature. First, few works have explored the mechanism of governing ESG decoupling from the technological perspective. Although a few articles have investigated the relationship between digital transformation and ESG performance (Chen and Hao, 2022 ; Lu et al., 2023 ; Fang et al., 2023 ; Wang et al., 2023 ), existing research on the impact of digital technology on corporate ESG decoupling is still scarce, with only fintech and digital transformation on corporate greenwashing (Xie et al., 2023 ; Sun et al., 2023 ). With digital technology’s increasing influence on firms’ behavior, whether corporate digital transformation can restrain ESG decoupling and its mechanisms have not been answered systematically.

Second, most studies use two external ESG databases to measure ESG decoupling, while strong interdependencies exist between these databases. For example, the Asset4 database (to calculate ESG performance) also analyzes ESG reports, while the Bloomberg database (to measure ESG reporting) also includes ESG performance measures (Velte, 2023 ). According to Velte’s ( 2023 ) critique of existing decoupling variable measurement, we follow his suggestion and adopt automated textual analysis of ESG reports to deduce ESG decoupling proxies.

Third, existing research considers ESG decoupling to be primarily managers’ impression management behavior, ignoring the fact that it may also be a limitation of managers’ information gathering and information analysis capabilities, which leads to an overly optimistic portrayal of a firm’s actual ESG performance, resulting in ESG decoupling. Just as optimistically-biased management earnings forecast serves as a proxy for the management forecast quality (Hirst et al., 2008 ), ESG decoupling can also be a vital proxy for ESG reporting quality. Hence, based on the information quality view of ESG decoupling, the existing literature falls short of studies that analyze ESG decoupling from the perspective of information inputs.

Our study explores the impact of digital transformation on ESG decoupling. We propose corporate digital transformation strengthens firms’ information processing ability and restrains information asymmetry, hence narrowing the gap between firms’ ESG reporting and ESG activities. Our paper investigates the mechanism of governing ESG decoupling from the technological perspective, adopts an automated textual analysis method to measure ESG decoupling, and considers ESG decoupling from both the impression management perspective and the information quality view, thereby supplementing the existing literature.

Research hypothesis

Corporate digital transformation improves firms’ ability to collect, process, and deliver ESG information, which restrains ESG decoupling from the input perspective of the ESG reporting process. Digital technologies can enhance corporate internal control (Liu et al., 2022 ). Internal control is a formal framework for producing firms’ reporting, which considers providing high-quality information one of its main objectives and generally includes some essential elements (Garrett et al., 2014 ). For example, the COSO framework is a widely accepted internal control guidance emphasizing managing various financial and non-financial reporting risks. ESG reports, also called CSR reports, environmental reports, sustainability reports, and so on, fall into the non-financial reporting category. Digital transformation can improve corporate internal control, mainly by enhancing the speed of information collection, expanding the scope of information collection, reducing the cost of information processing, and improving the accuracy and reliability of information (Chen and Hao, 2022 ). As a result, when managers’ ability to access information improves, they will likely be less blind and optimistic in drafting ESG reports.

The empowering effect of corporate digital transformation is mainly focused on information and communication, which is the crucial element of the internal control system. Digital technologies enhance firms’ open and clear communication and data collecting (Matarazzo et al., 2021 ). They enable companies to disclose timelier, more accurate information and better fit stakeholders’ information needs. Digital transformation facilitates the exchange of information and resources between companies and the outside; enhances connections, communication, and cooperation between companies and upstream or downstream companies (Correani et al., 2020 ; Vial, 2019 ); improves management’s perceptual capabilities to identify, develop, and evaluate technological opportunities regarding customer needs (Teece, 2007 ); and helps create new services or products tailored to client requirements and optimize customer experience (Vial, 2019 ). Effective internal control makes ESG disclosures more consistent with actual activities. Therefore, corporate digital transformation can enhance internal control levels and provide a guarantee to mitigate ESG decoupling.

Corporate digital transformation can reduce management’s subjective motivations for information disclosure manipulation, which restrains ESG decoupling from the output’s perspective of the ESG reporting process. Based on agency theory, information asymmetry between firms and stakeholders is an important driver of ESG decoupling (Velte, 2023 ). Digital transformation can reduce information asymmetry between firms and stakeholders and enhance corporate information transparency (Zhong et al., 2023 ). With the guidance of national policies, companies that undergo digital transformation gain more market attention, increasing analyst attention and media coverage (Wu et al., 2021 ). Hence, digital transformation enhances stakeholders’ monitoring over firms. In addition, digital transformation makes companies’ production and operation processes more transparent and thus reduces external supervision costs (Goldfarb and Tucker, 2019 ). It enables external monitors to verify a firm’s ESG information at a lower cost, thereby improving the effectiveness of stakeholders’ monitoring. Meanwhile, digitalization inhibits organizational centralization and promotes decentralization at the grassroots level (Adner et al., 2019 ), weakening management’s discretion. These changes in internal and external factors indicate that corporate digitization can significantly reduce managers’ opportunism behavior and tendency to manipulate information disclosure. Reducing disclosure manipulation helps align ESG reporting with its actual performance.

Given the theoretical analysis above, corporate digital transformation can improve ESG reports’ quality through the information process’s inputs and outputs, reduce management’s over-optimism and exaggeration of ESG information, and thus curb ESG decoupling. Hence, we propose the following conjecture:

H1: Corporate digital transformation significantly mitigates ESG decoupling.

Research design

Data and sample.

This paper focuses on publicly traded firms in Shanghai and Shenzhen A-shares that disclosed ESG reports from 2010 to 2019. In addition, this paper deletes the following observations: financial and insurance industry samples, the ST, *ST, and PT companies, and observations missing data used in the regression model. After the above processing, we obtain 6185 observations. We winsorize all the continuous variables at 1% and 99% quartiles to eliminate the influence of extreme values. The data on corporate digital transformation is derived from the CSMAR database. Data on degrees of corporate digital transformation are obtained manually through text analysis. ESG decoupling includes two parts of data: data measuring ESG disclosure are manually collected from independent ESG reports, and the data measuring actual ESG performance are obtained from the CNRDS database. Other data come from the CSMAR database.

A company may provide social and environmental data in its CSR reports, sustainable development reports, sustainability reports, and ESG reports, and this can be seen as an aspect of a business being a corporate citizen that receives benefits from, and therefore owes duties back to, society. Following Gillan et al. ( 2021 ) and Tsang et al. ( 2023 ), we treat these reports without distinction and refer to them collectively as ESG reporting. As ESG issues have attracted widespread attention from firm stakeholders, more and more listed companies in China have begun to disclose ESG reports. As shown in Fig. 1 , the number of ESG reports has increased significantly from 438 in 2010 to 850 in 2019, which is consistent with the existing literature (He et al., 2022 ).

This figure shows the trend of total ESG reports disclosed by China’s listed companies, marked in bule colors. Orange line is the number of ESG reports used in our analysis. Both line show that the number of ESG reports has increased significantly from 2010 to 2019.

Model and variable definition

Following Zhang ( 2022 ) and Wu et al. ( 2021 ), we construct the following model (1) to test our hypothesis H1.

In model (1), the dependent variable is ESG decoupling ( Decoupling ), and the core independent variable is corporate digital transformation (Digital). A battery of control variables is added to the model. We expect to find a negative α1 if hypothesis H1 is supported. Table 1 outlines the definitions of the variables.

ESG decoupling

Following existing studies (Sauerwald and Su, 2019 ; Zhang, 2022 ), we define ESG decoupling as the gap between the optimistic tone of corporate ESG reports and actual ESG performance. We use metrics to measure ESG reporting’s optimistic tone through text-content analysis (Tetlock et al., 2008 ; Arslan-Ayaydin et al., 2016 ). The optimistic tone vocabulary was judged using a word list developed and validated by Loughran and McDonald ( 2011 ). The optimistic tone is the number of positive words minus the negative word count divided by the sum of the positive and negative words in the ESG report, multiplied by 100 to yield a percentage interpretation (Blau et al., 2015 ). The ESG rating score from the CNRDS database, a third-party agency that rates listed companies’ ESG performance, measures corporate ESG performance. Then, we convert optimistic tone and ESG performance to z-scores to make them comparable. ESG decoupling is then calculated as converted optimistic tone minus ESG performance scores, and the larger the difference, the greater the decoupling between disclosed ESG and practical ESG activities (Sauerwald and Su, 2019 ).

Corporate digital transformation

Referring to Wu et al. ( 2021 ), Wu et al. ( 2022 ), and Zhou and Li ( 2023 ), we construct a digital transformation dictionary and adopt the textual analysis approach to measure a firm’s digital transformation degree. To construct the digital terminology dictionary, we first obtain several important national-level policy documents, important news and meetings, and recent government work reports related to the digital economy between 2010 and 2019. Then, we use Python word segmentation processing and manual recognition, and select the words pertaining to corporate digitalization with a frequency greater than or equal to 5 times to constitute a digital terminology dictionary. Finally, these words are classified into five categories: artificial intelligence technology, big data technology, cloud computing technology, blockchain technology, and digital technology application. The specific words included in the digital transformation dictionary are shown in Appendix A . To measure a firm’s digital transformation, we adopt machine learning method to analyze the text of the “Management Discussion and Analysis” (MD&A) part of the annual report, calculate the frequencies of keywords that appeared in our digital transformation dictionary, and then add them up. The greater the value of the frequencies of keywords, the higher the corporate digital transformation.

Control variables

Drawing upon literature such as Sauerwald and Su ( 2019 ), Zhang ( 2022 ), and Wan et al. ( 2024 ), this paper controls for the following variables: financial leverage ratio ( Lev ), return on net assets ( ROE ), firm growth ( Growth ), firm age ( Age ), firm size ( Size ), CEO/Chair duality ( Dual ), board size ( DirNum ), largest shareholder’s stockholding ratio ( First ), institutional investors’ shareholding ratio ( Inst ), and state-owned enterprise ( SOE ).

Empirical results and analysis

Descriptive statistics.

Table 2 summarizes the descriptive statistics of the main variables. The mean value of ESG decoupling ( Decoupling ) in the sample is 0.0483, which indicates that ESG disclosure is more than the actual fulfillment, and there is general inconsistency between ESG words and actions. The standard deviation of Decoupling is 1.5087, suggesting ESG decoupling varies considerably between companies. The mean value of digital transformation (Digital) is 1.159, the minimum value is 0, the median value is 0.693, and the maximum value is 4.990, indicating that the degree of digital transformation varies widely among listed firms. Most firms’ digital transformation values are lower than the average in China, consistent with the results of Wu et al. ( 2021 ).

Univariate analysis

Table 3 reports the results of the univariate test. The mean value of ESG decoupling ( Decoupling ) is 0.189 for firms that did not undergo digital transformation and −0.024 for firms that conducted digital transformation. The difference between the two groups is significantly negative at p  < 0.01, indicating significantly different ESG decoupling in the two sub-groups. Regarding the control variables, the mean values of financial leverage ratio (Lev), top shareholder ownership (First), and state-owned enterprise (SOE) are significantly higher for companies without digital transformation than for companies with digital transformation. In comparison, the mean values of firm size (Size), firm age (Age), CEO/Chair duality (Dual), and number of board directors (DirNum) for companies without digital transformation are significantly lower than for companies with digital transformation, indicating significant differences in the characteristics of the two sub-groups.

Baseline regression analysis

Table 4 shows the results of the baseline regressions. Column (1) shows that the coefficient of digital transformation is significantly negative at p  < 0.01 without controlling for the control variables. Column (2) shows that the coefficient on digital transformation is −0.1168 and significantly negative at p  < 0.01 after controlling for the control variables. In terms of economic magnitude, for a one-unit standard deviation increase in corporate digital transformation, ESG decoupling will decrease by 15.46%, indicating that a higher degree of corporate digital transformation leads to less disconnect between “words and deeds” on ESG. This empirical result suggests that corporate digital transformation plays a governance role in ESG decoupling. Thus, our hypothesis H1 is supported.

Regarding control variables, financial leverage ratio (Lev), firm age (Age), and state-owned enterprise (SOE) are significantly and positively related to ESG decoupling. In contrast, firm size (Size) and number of board directors (DirNum) are significantly and negatively associated with ESG decoupling. The results for the control variables are consistent with previous studies (Zhang, 2022 ; Sauerwald and Su, 2019 ). The baseline results indicate that the governance role of digital transformation in ESG decoupling can complement the governance mechanisms found in previous literature (Gull et al., 2023 ; Zhang, 2022 ). It can also provide a new approach for management and external regulators who aim to reduce the degree of ESG decoupling. Utilizing digital technologies to set up an effective internal control system for ESG governance and establish an externally efficient and intelligent ESG disclosure monitoring platform are essential for maximizing the governance efficacy of digital transformation on ESG decoupling.

Endogeneity

2sls regression method.

The effect of a firm’s digital transformation on ESG decoupling may suffer the endogeneity problem. We adopt the 2SLS regression method to alleviate this concern. Drawing on Xiao et al. ( 2022 ), we select the interaction term between each city’s post and telecommunications data in 1984 and the number of Internet users nationwide with a one-year lag as the instrumental variable of firm digital transformation. The means of communication adopted in a region affect a firm’s acceptance and application of information technology through technological capability, satisfying the correlation requirements of instrumental variables. Meanwhile, posts and telecommunications are mainly infrastructure for communication services and do not directly contribute to ESG decoupling, satisfying the exogeneity requirement. Specifically, referring to Nunn and Qian ( 2014 ), we first figure the product of the number of national internet users in the previous year and the number of fixed telephones per 10,000 people in 1984 in the prefecture city where the firm is located and then calculate the natural log value of the product as the instrumental variable (denoted as IV_1984 ).

Column (1) of Table 5 shows that the regression coefficient of the instrumental variable (IV_1984 ) is significantly positive at the 1% level in the first stage regression, indicating that the instrumental variable is significantly associated with the independent variable. The Kleibergen-Paap rk LM statistic is 14.532, rejecting the instrumental variable’s under-identified hypothesis. The F statistic is 13.663, which is greater than the thumb-rule value of 10, indicating no significant weak instrumental variable problem, which supports the rationality of the instrumental variables selected in this paper. Column (2) shows that instrumented digital transformation (denoted as Predicted_Digital ) is negatively associated with ESG decoupling at the 1% level, indicating that the main conclusion of our paper still holds after alleviating the potential endogeneity problem.

Heckman two-stage regression

Digital transformation is a strategic choice firms make in response to external environment changes, and hence, our study may suffer a self-selection problem. This paper uses a Heckman two-stage regression to mitigate potential sample selection bias (Heckman, 1979 ). In the first stage, the dummy variable of whether a firm undergoes digital transformation (denoted as Treat ) is constructed as the explanatory variable. Considering that industry characteristics, firm characteristics, and executive factors may influence firms’ digital transformation, all control variables used in the baseline regression are included in the Probit regression, and then we estimate the probability of a firm undergoing digital transformation and obtain the inverse Mills ratio ( IMR ). IMR is added to the original model (1) as a control variable for the second-stage regression. Column (2) in Table 6 shows that the regression coefficient of digital transformation ( Digital ) is still significantly negative after adding IMR , suggesting that digital transformation’s effect on ESG decoupling remains robust.

To further address sample bias, this paper uses the Propensity Score Matching (PSM) method to alleviate the endogeneity concern. We classify firms that did not implement digital transformation as the control group (Treat = 0) and those that implemented digital transformation as the treatment group (Treat = 1). All the control variables used in our baseline regression were selected as covariates. We formed the test sample according to the nearest approach matching method in the 1:3 caliper with return. After matching, the standardized variation of each covariate is less than 10%, indicating no significant difference between the covariates of the treatment and control groups, which satisfies the equilibrium hypothesis. Table 7 shows the results of regression using matched samples. After controlling for differences in essential characteristics at the firm level, corporate digital transformation (Digital) negatively relates to ESG decoupling, indicating that the baseline regression findings are still robust.

Robustness tests

Alternative measurement of corporate digital transformation.

Referring to Li et al. ( 2023 ), this paper uses the proportion of digital economy-related intangible assets to total assets in the breakdown of a firm’s intangible assets as an alternative measurement for corporate digital transformation ( Digital 1 ). Digital economy-related intangible assets refer to line items including “intelligent platform,” “management system,” “client,” “network,” “software,” and other digital technology-related keywords, as well as related patents. Column (1) in Table 8 shows Digital 1 negatively restrains ESG decoupling at p  < 0.05, indicating that the findings of the baseline regression still hold.

Alternative measurements of ESG decoupling

ESG decoupling is the gap between the optimistic tone of ESG reporting and ESG performance. Here, we change the calculation of optimistic tone in ESG reporting and the proxy of ESG performance to obtain alternative ESG decoupling measurements. First, the calculation of optimistic tone in ESG reporting is changed as the number of positive words minus the negative word count scaled by the total number of words in the ESG report (Tetlock et al., 2008 ; Blau et al., 2015 ). We still obtain ESG performance from the CNRDS database, convert optimistic tone and ESG scores to z-scores, and construct the first alternative measure of ESG decoupling (Decoupling1). Second, the way we calculate the optimistic tone in ESG reports does not change, and we derive ESG scores from the RKS rating agency as the proxy of the firm’s ESG performance. Then, we convert the optimistic tone in ESG reports and ESG scores to z-scores and construct another measurement of ESG decoupling (Decoupling2). Columns (2) and (3) of Table 8 report the regression results using alternative measures of ESG decoupling. We can see that the association between digital transformation and ESG decoupling remains significantly negative at the 1% level, suggesting that the primary relationship in our baseline regression still holds.

Extending the observation window

There may be a hysteresis effect on the impact of corporate digital transformation on ESG decoupling. Thus, this paper extends the observation window to test the robustness of our main findings. Specifically, we construct one-year and two-year lags of corporate digital transformation (denoted as Digital_lag1 and Digital_lag2 ). Table 9 shows the results. The effects of digital transformation on ESG decoupling are all significantly negative at the 1% level, indicating that the time window extension does not attenuate the impact of digital transformation on ESG decoupling and further supporting the baseline regression.

Excluding explanations of corporate strategic disclosure

This paper measures corporate digital transformation via textual analysis methods. Although the indicators more comprehensively capture firms’ actual use of digital technologies, they may also be exaggerated by firms’ strategic information disclosure. To exclude this possible explanation, we conduct the following tests. First, considering that many listed companies belong to high-tech enterprises and have connections with the Internet and Internet business models, we exclude the high-tech listed companies from the sample. Second, drawing on Xiao et al. ( 2022 ), we construct a model to estimate a firm’s normal number of disclosures of digitization-related terms and conclude that the residuals less than or equal to 0 are more likely to be normal disclosures, and those greater than 0 are more likely to be exaggerated disclosures; thus, we eliminate observations with residuals greater than 0. Third, we exclude from the sample companies that the Shenzhen Stock Exchange, the Shanghai Stock Exchange, or the China Securities Regulatory Commission (CSRC) punished for information disclosure during the sample period. Lastly, we retain only those firms with excellent or good information disclosure assessment results from the Shenzhen Stock Exchange and Shanghai Stock Exchange, which are less likely to disclose information strategically. As reported in Table 10 , all the digital transformation (Digital) coefficients are negative at the 1% statistical level after controlling for potential strategic disclosure behavior, suggesting that the firm’s strategic disclosure behavior does not affect our primary relationship.

Missing variable test

Although baseline regression includes a range of control variables, important digital transformation and ESG decoupling variables may still be left out, such as the provincial digital environment over time. This paper further incorporates the province-year joint fixed effect to absorb the influence of unobservable factors at the regional level over time. As shown in Table 11 , the regression coefficient of digital transformation is significantly negative at the 5% level after controlling the province-year fixed effect, indicating that digital transformation’s enabling and governance role on ESG decoupling still works.

Further analysis

Mechanism test.

In conjunction with the notion that corporate digital transformation restrains ESG decoupling from the inputs and outputs perspective of the ESG reporting process, this section will focus on examining the potential mechanisms: whether digital transformation reduces ESG decoupling by improving internal control quality (a proxy for the input perspective) and reducing information asymmetry (a proxy for the output perspective). According to the above theoretical analysis, on the one hand, corporate digital transformation improves internal control by optimizing internal control and thus enhances ESG information disclosure quality. On the other hand, digital transformation decreases information asymmetry by restraining managers from manipulating information disclosure, narrowing the differences in ESG talk and walk. Following Baron and Kenny ( 1986 ) and Liu et al. ( 2021 ), we construct the following models to examine the mediating role of internal control and information asymmetry.

In model (2), δ 1 measures the magnitude of the efficacy of digital transformation on internal control (denoted as Icw ) and information asymmetry (denoted as EM), respectively. Internal control quality ( Icw ) is measured as a composite index of internal control obtained from the Diebold database. Referring to Roychowdhury ( 2006 ), information asymmetry ( EM ) is measured by the degree of a firm’s actual earnings management. In model (3), β 1 measures the efficacy of Digital on ESG decoupling after considering the mediating impact of internal control ( Icw ) and information asymmetry ( EM ).

Table 12 shows the results of the mechanical test. In Column (1), digital transformation ( Digital ) is positively associated with internal control quality at the 1% level. Column (2) shows that the coefficient of internal control ( Icw ) is significantly negative at the 10% level, indicating that improving internal control mitigates ESG decoupling, and the coefficient of digital transformation ( Digital ) is still significantly negative, suggesting a partial mediating effect exists. Column (3) demonstrates that digital transformation ( Digital ) negatively relates to earnings management at the 1% level. Column (4) indicates that EM has a significantly positive influence on ESG decoupling, and the coefficient of digital transformation ( Digital ) is still significantly negative, indicating a partial mediation effect of EM . These results suggest that corporate digital transformation can alleviate ESG decoupling by enhancing internal control quality and reducing information asymmetry, which further supports our hypothesis H1. To communicate ESG information externally accurately, firms need to aggregate their ESG data appropriately (input perspective). Subsequently, they must accurately and impartially summarize and report ESG information (output perspective). Our findings confirm that digital transformation enhances a company’s capabilities in information input and output processes, thereby alleviating ESG decoupling. This indicates that the systematic and comprehensive upgrading goals of digital transformation for organizational activities and processes significantly influence various aspects of businesses. Firms require continuous adaptation of corporate structures and business models, fostering gradual digital transformation, and efficiently bridging the gap between technological advancements and effective management practices.

Heterogeneity analysis

Regional differences.

According to dynamic capability theory, a firm’s dynamic capability is greatly affected by its existing capability endowment (Barreto, 2010 ). Due to factors such as economic accumulation, topography, history, and resource endowment, China’s eastern and central-western regions differ considerably in digital infrastructure. The eastern area has abundant digital infrastructure, talents, technological innovation, and digital financial resources, which enable firms in the eastern region to accelerate digital transformation (Liu and Dong, 2021 ). Compared with firms in China’s central-western region, firms in the eastern region typically have stronger dynamic capabilities of digital transformation. Therefore, we expect firms in the eastern region to have stronger technical abilities to reduce ESG decoupling than firms in the central-western area.

We divide the full sample into central-western and eastern region sub-groups based on firm location to investigate this regional heterogeneity. Footnote 1 As shown in Column (1) and Column (2) of Table 13 , the coefficient of digital transformation ( Digital ) is significantly negative in the eastern region. However, although the coefficient for digital transformation remains negative in the central-western area, its absolute value is considerably smaller than that in the eastern region. Following Wang et al. ( 2023 ), we use Chow Test to identify the differences in coefficients across groups and find that there is a statistically significant difference in coefficients between central-western and eastern region sub-groups ( p  < 0.0001), which is in line with our expectation. In the central-western regions, the governance effect of digital transformation on ESG decoupling is not as pronounced as that in the eastern regions. To address the problem of unbalanced regional development, it is crucial to have the impetus of policy initiatives. The government should increase resources and technology investment in the central-western regions to help their enterprises accelerate digital transformation.

GRI following

The CSRC and stock exchanges encourage listed companies to follow Global Reporting Initiative (GRI) guidelines when preparing ESG reports. The GRI guidelines aim to improve sustainability reports’ information quality, comparability, and credibility worldwide. The compliance of GRI guidelines makes the quality of firms’ ESG reports higher, enhances the transparency of non-financial information, and reduces information asymmetry. Previous studies find that firms following ESG-promoting institutions typically have better ESG disclosure (Ali and Frynas, 2018 ), strengthen ESG report credibility by following GRI guidelines, and reduce ESG decoupling (García-Sánchez et al., 2022 ). Therefore, ESG decoupling is less severe in firms following GRI guidelines, and the impact of digital transformation on ESG decoupling may be less noticeable. Based on the above analysis, we expect that the nexus between digital transformation and ESG decoupling is more pronounced in firms that do not follow GRI guidelines.

To test the moderating role of following the GRI, we divide the total sample into two sub-groups according to whether a firm prepares ESG reports based on GRI guidelines. Column (3) and Column (4) of Table 13 represent the regression results of the two sub-groups. A significant negative relationship between digital transformation (Digital) and ESG decoupling exists only in firms that do not follow GRI recommendations (−0.0900, T  = −4.5586), and there is a statistically significant difference in coefficients between the two sub-groups ( p  < 0.0001), which is in line with our expectations.

Economic consequences

This paper further explores whether digital transformation can influence corporate high-quality development by restraining ESG decoupling. Digital technology has brought about information dissemination across time and space, and companies can improve the efficiency of their information processing and circulation (Hansen and Sia, 2015 ). ESG disclosure, as an essential marketing tool, can respond to an increasingly competitive business environment more effectively (Ryou et al., 2022 ) and gain a sustainable competitive advantage (Flammer, 2015 ). Companies using ESG reports to build legitimacy can reduce information asymmetry between firms and stakeholders and mitigate conflicts with stakeholders (Harjoto and Jo, 2011 ). With the help of digital transformation, companies disclose more reliable, comprehensive information to stakeholders, effectively meeting the information efficiency required for capital market transactions (Wu et al., 2021 ). ESG information that is more aligned with actual performance is more valuable, as it helps stakeholders better judge firms’ operating situations and development prospects. As a result, firms can obtain good reputations and financial resources, thus improving productivity and promoting high-quality corporate development.

This paper uses firms’ total factor productivity (TFP) to measure their high-quality development and examines the effect of the relationship between corporate digital transformation and ESG decoupling on TFP. Specifically, we use the stepwise regression method to examine whether corporate digitalization can improve TFP by reducing ESG decoupling. TFP is calculated according to Levinsohn and Petrin ( 2003 ). As reported in Column (1) of Table 14 , the coefficient of digital transformation (Digital) is significantly positive at p  < 0.01, indicating that digital transformation contributes substantially to increased TFP. Column (2) shows that the coefficient of digital transformation (Digital) decreases but remains significantly positive after including the mediator ESG decoupling, which suggests that digital transformation’s inhibiting effect on ESG decoupling can further enhance firms’ high-quality development proxied by TFP.

Discussion and conclusion

Existing studies on ESG decoupling’s influencing factors mainly focus on the monitoring contexts (Tashman et al., 2019 ; Zhao et al., 2022 ; Yu et al., 2020 ; Marquis and Qian, 2014 ; Kim and Lyon, 2015 ), market pressures (Arouri et al., 2021 ; Zhang, 2022 ; García-Sánchez et al., 2021 ), firm characteristics (Parra-Domínguez et al., 2021 ; Li and Wu, 2020 ; Marquis et al., 2016 ), corporate governance (Gull et al., 2023 ; Eliwa et al., 2023 ), and individual psychology (Shahab et al., 2021 ; Al-Shammari et al., 2019 ; Sauerwald and Su, 2019 ; García-Sánchez et al., 2020 ). However, there are still several unresolved issues in the existing literature. First, there is limited literature exploring the mechanism of governing ESG decoupling from the technological perspective. Prior research on the impact of digital technology on corporate ESG decoupling is still scarce, with only fintech and digital transformation on corporate greenwashing (Xie et al., 2023 ; Sun et al., 2023 ). Second, most studies use two external ESG databases to measure ESG decoupling, and there are substantial interdependencies between these databases. As suggested by Velte ( 2023 ), solid measures of ESG decoupling should compare quantitative performance measures and qualitative descriptions on ESG reports and need to include automated text analyses of sustainability reports for future research designs. Third, extant studies mainly regard ESG decoupling as an impression management behavior of managers, ignoring that ESG decoupling may also be subject to the limitation of managers’ information gathering and information analysis capabilities.

Regarding the above issues in the existing literature, and in response to Velte’s ( 2023 ) calling for text analysis design and strengthening ESG decoupling research, this paper uses textual analysis to measure ESG reporting’s optimistic tone, defines ESG decoupling as the gap between the optimistic tone of corporate ESG reports and actual ESG performance, and investigates the efficacy of corporate digital transformation on ESG decoupling. Our study proposes that corporate digital transformation strengthens firms’ information processing ability, alleviates information asymmetry, and reduces the gap between firms’ ESG reporting and ESG activities. Our paper explores the mechanism of governing ESG decoupling from the technological perspective, adopts an automated textual analysis method to measure ESG decoupling, and considers ESG decoupling from both the impression management perspective and the information quality view of ESG decoupling, thereby filling the gap in the existing literature.

Our study relates closely to an article examining the impact of digital transformation on a firm’s greenwashing (Sun et al., 2023 ). Nevertheless, our study is markedly distinguishable from Sun et al. ( 2023 ). First, we define ESG decoupling as the gap between the optimistic tone of corporate ESG reports and actual ESG performance (Sauerwald and Su, 2019 ; Zhang, 2022 ) and use metrics to measure ESG reporting’s optimistic tone through textual analysis (Tetlock et al., 2008 ; Arslan-Ayaydin et al., 2016 ). In contrast, Sun et al. ( 2023 ) consider ESG scores in the Asset4 database as ESG performance indicators and Bloomberg’s database as a source of ESG reporting measures. However, these databases have substantial interdependencies, as the Asset4 database also analyzes ESG reports, and the Bloomberg database also includes ESG performance measures (Velte, 2023 ). Given Velte’s ( 2023 ) criticism of existing measures of ESG decoupling, we follow his suggestion and adopt automated textual analysis of reports to gain ESG decoupling proxies. Secondly, our mechanism tests focus on analyzing how digital transformation affects ESG decoupling from the input and output perspectives of the ESG reporting process. Although Sun et al. ( 2023 ) examine the governance role of digital transformation, we explore the empowering role of digital transformation in addition to digital transformation’s governance role. Furthermore, considering that the eastern regions of China have more abundant digital resources than the central-western regions, we offer additional insights into the cross-regional heterogeneity of digital transformation effects. Our study is further distinguished from Sun et al. ( 2023 ) as we exclude the impact of corporate strategic disclosure on digital transformation and conduct economic consequences tests. Overall, our study complements the work of Sun et al. ( 2023 ).

Based on a sample of A-share listed companies on the Shenzhen and Shanghai Stock Exchanges during 2010–2019, this paper examines the influence of corporate digital transformation on ESG decoupling and finds that corporate digital transformation can reduce ESG decoupling significantly. This relationship still holds after a series of robustness tests. Mechanism tests find that corporate digital transformation helps improve internal control and reduce information asymmetry, thus mitigating ESG decoupling. In addition, heterogeneity examinations verify that digital transformation’s inhibitory effect on ESG decoupling mainly exists among firms in the eastern region of China and those that do not follow GRI guidance. Finally, the economic consequences study finds that digital transformation promotes high-quality corporate development by reducing ESG decoupling.

Drawing on the findings above, we put forth the following policy implications. First, the government should encourage and support corporate digital transformation across various industries, prospectively formulate differentiated digital transformation support policies, and provide policy support to drive deep integration of digital technology and the real economy. In addition, the central government should attach importance to the digital development of the central and western regions and narrow the gap between the digitalization of firms in the central and western regions and the eastern regions.

Second, regulators need to improve the institution and policy of ESG governance in the emerging digital economy environment to ensure its feasibility and operability. In response to new social responsibility problems such as severe forgery and privacy leakage arising from the digital economy, government departments should introduce laws and regulations in a forward-looking, timely manner. For example, regulators can use digital technology to establish an intelligent information disclosure system, effectively supervise enterprises to fulfill lawful and compliant information disclosure, and strengthen supervision and punishment of ESG decoupling. It is also necessary to promote public complaint and monitoring mechanisms, guarantee the effectiveness of social monitoring, and increase the public’s willingness to participate in monitoring firms’ ESG decoupling behavior.

Third, managers should seize the enormous opportunities created by the digital economy, continuously adjust the corporate organizational structure and business models, promote digital transformation incrementally, and more effectively reduce the mismatch between digital technology and business management. Meanwhile, firms should attach great importance to the social value of digital empowerment. For example, firms may expedite the development of ESG governance systems in the digital context, construct information disclosure and internal governance platforms through digital technologies, improve internal control quality, curb management’s opportunistic motives, accurately and reliably disclose ESG information, and achieve mutual benefit for firms and stakeholders.

Our study has its limitations that may be addressed in future research. First, although the use of digital keywords for text mining to depict digital transformation is a specific and feasible dimension, the use of machine learning technology to ensure the comprehensiveness, accuracy, and objectivity of keywords, and at the same time to test the robustness of the possible problems of over-or under-disclosure of digital-related information. However, the company’s digital transformation involves changes in technology, talent, organization, and strategy, etc. Further studies may measure the digital operation level more effectively using a firm-specific word dictionary to find a more interesting conclusion. Second, we define ESG decoupling as the inconsistencies between the optimistic tone of corporate ESG reports and actual ESG performance, and rely on the emotional dictionary published by Loughran and Mcdonald ( 2016 ) to analyze the optimistic tone. Although Loughran and Mcdonald’s ( 2016 ) dictionary is widely used in textual analysis studies, it does not cover all the positive Chinese words. Thus, there is a lack of authoritative Chinese sentiment dictionaries in the study of Chinese text analysis. In this regard, further research may construct a more comprehensive and accurate Chinese emotional dictionary to measure the optimistic tone of ESG reporting, and examine the economic consequence of ESG decoupling to respond to Velte’s ( 2023 ) call for more research on the consequences of ESG decoupling. Lastly, due to the widespread phenomenon of ESG decoupling in various settings (Delmas and Burbano, 2011 ; Tashman et al., 2019 ; Eliwa et al., 2023 ), our findings about the empowering role and governance role of corporate digital transformation on ESG decoupling can be generalized with caution to other contexts. Nevertheless, given the institutional background heterogeneities between China and other countries, we call for future research to employ the international context to investigate whether corporate digital transformation has similar or different impacts on ESG decoupling.

Data availability

The data used in this paper were obtained from the CSMAR Database and CNRDS Database. The website is available at https://www.gtarsc.com/ and https://www.cnrds.com/Home/Login , respectively. However, access to these data is subject to restrictions and requires a license. Interested parties can obtain the data with the permission of CSMAR and the CNRDS Database.

The central-western region includes Chongqing, Inner Mongolia, Ningxia, Henan, Hubei, Hunan, Guangxi, Sichuan, Guizhou, Yunnan, Tibet, Shaanxi, Gansu, Qinghai, Shanxi, Xinjiang; the rest provinces belong to the eastern region.

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This work was supported by the National Social Science Fund of China (Grant Numbers: 22BGL294).

School of Accounting, Zhejiang University of Finance and Economics, Hangzhou, China

Xiangyu Chen

School of Accounting, Zhejiang Gongshang University, Hangzhou, China

Peng Wan, Zhefeng Ma & Yu Yang

XC: conceptualization, methodology, validation, writing-original draft preparation. PW: methodology, funding acquisition, data curation, formal analysis, writing-original draft preparation, writing-reviewing and editing. ZM: data curation, software, visualization, writing-original draft preparation. YY: software, visualization, writing-reviewing and editing.

Correspondence to Peng Wan .

The author(s) declare no competing interests.

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Chen, X., Wan, P., Ma, Z. et al. Does corporate digital transformation restrain ESG decoupling? Evidence from China. Humanit Soc Sci Commun 11 , 407 (2024). https://doi.org/10.1057/s41599-024-02921-w

Received : 29 July 2023

Accepted : 29 February 2024

Published : 14 March 2024

DOI : https://doi.org/10.1057/s41599-024-02921-w

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The Effects and Side Effects of Unconventional Monetary Policy Summary of the First Workshop on the "Review of Monetary Policy from a Broad Perspective"

March 11, 2024 Bank of Japan

• Full Text [PDF 504KB]

On December 4, 2023, the first workshop on the "Review of Monetary Policy from a Broad Perspective," entitled "The Effects and Side Effects of Unconventional Monetary Policy," was held at the Bank of Japan's Head Office. At the workshop, economists and financial and economic experts participated in a lively discussion on the effects and side effects of monetary policy over the past 25 years, focusing on four topics: financial markets, the financial system, the Bank of Japan's balance sheet, and unconventional monetary policy.

Session 1 provided an overview of domestic financial markets over the past 25 years and the impact of monetary policy on the degree of market functioning. Participants discussed whether it would be possible to assess the impact of monetary policy from a broader perspective, for example by broadening the scope of the analysis. Session 2 focused on the impact of the low interest rate environment on the risk-taking behavior of financial institutions. Participants discussed issues such as developments in the demand for funds and the allocation of funds. Session 3 looked at issues concerning central bank finances. Participants discussed topics such as central banks' external communication. Session 4 examined the impact of unconventional monetary policy on factors such as economic activity and prices. Participants discussed a range of issues, including issues not covered in the presentations at the workshop such as the formation mechanism of inflation expectations and linkages between wages and prices.

The panel discussion in Session 5 mainly covered issues such as methods for analyzing the effects and side effects of monetary policy and the mechanisms underlying price developments. Participants pointed out that it was difficult to assess the effects and side effects of unconventional monetary policy in a comprehensive manner given that multiple policy tools were used at the same time, and that it was therefore important to gather experts with different backgrounds to discuss a variety of issues, as in this workshop. Furthermore, participants also noted that in assessing the impact of monetary policy, it was necessary to deepen the analysis not only of the formation of inflation expectations but also of firms' behavior and its impact on economic developments and the formation of wages and prices.

• The views expressed at the workshop and summarized in this paper are those of the individual speakers and do not necessarily represent the views of the organizations to which they belong.

Please contact below in advance to request permission when reproducing or copying the content of this paper for commercial purposes. Monetary Affairs Department, Bank of Japan Please credit the source when reproducing or copying the content of this paper.

Monetary Affairs Department

E-mail : [email protected]

5.2.6 Research on Digital Financial Advice. The research papers published in the field of Digital Financial Advice can be grouped into papers focusing on the behavior of users in trading communities and into papers analyzing such communities in order to relate the communication within the community to financial markets and, thereby, to make ...

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in digital finance developments. Accordingly, this paper reviews the existing research on digital finance and uses relevant real world experiences from several regions to gain insight into the state of digital finance research and development. This paper is one of the first papers to review the global developments in digital finance.

This paper presents an analytical framework that describes the business model of banks. It draws on the classical theory of banking and the literature on digital transformation. It provides an explanation for existing trends and, by extending the theory of the banking firm, it illustrates how financial intermediation will be impacted by innovative financial technology applications.

of digital financial inclusion on economic growth, and second, we explore the key drivers of digital financial inclusion. We use new indices developed by Khera et. al. (2021), which are the most comprehensive to date in capturing multiple aspects of digital financial inclusion across 52 EMDEs across time.

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The COVID-19 crisis seems to have disproportionately impacted women's financial resilience. In fact, women's economic involvement in the financial sector remains unequal. This study compares the impact of digital financial inclusion on women's economic empowerment before and after the COVID-19 epidemic in Saudi Arabia. Using data collected from the Global Financial Inclusion Database for ...

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This research attempts to analyze the effect of digital finance on value creation in Commercial Tunisian banks. Using a quantitative method, 100 people were surveyed in eighteen of the twenty ...

Using a new dataset on sectoral credit exposures covering financial and non-financial sectors in 115 economies over the period 1940-2014, we document the following evidence that corporate debt plays a key role in explaining boom-bust cycles, financial crises, and slow macroeconomic recoveries: (i) corporate debt accounts for two thirds of the aggregate credit expansion before crises and ...

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This paper empirically examines the efficacy of corporate digital transformation on a firm's environmental, social, and governance (ESG) decoupling. Adopting the text analysis method and using a ...

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Essay on My City 500+ Words

India, with its diverse landscapes, rich history, and vibrant culture, is a land of incredible cities. One such city, my city in India, stands out as a shining example of everything that makes this country unique and remarkable. In this essay, I will take you on a journey through the wonders of my city and argue why it holds a special place in my heart.

Historical Significance

My city is steeped in history, and its roots go back centuries. From ancient temples to magnificent forts, every corner of the city has a story to tell. For instance, the majestic Red Fort, a UNESCO World Heritage site, stands as a testament to the city’s role in India’s struggle for independence. This historical significance not only makes my city a living museum but also instills a sense of pride and connection with our past.

Cultural Diversity

One of the most remarkable aspects of my city is its cultural diversity. People from all over India, representing different languages, traditions, and cuisines, call this city their home. This cultural tapestry creates a unique blend of traditions and celebrations. For instance, during Diwali, the Festival of Lights, the city comes alive with dazzling displays of lamps, symbolizing the victory of light over darkness.

Architectural Marvels

My city boasts awe-inspiring architectural marvels that leave visitors and residents alike in wonder. The Lotus Temple, an architectural masterpiece, welcomes people of all religions to meditate and find inner peace. The city’s blend of ancient and modern architecture reflects its ever-evolving character.

Educational Hub

Education is a cornerstone of my city’s identity. It is home to renowned universities, institutes, and research centers that attract students and scholars from across the globe. These institutions not only foster innovation and excellence but also contribute to the city’s intellectual vibrancy.

Green Oasis

Despite its bustling urban life, my city takes pride in its green spaces. Parks, gardens, and the serene banks of the Yamuna River offer residents and visitors a respite from the city’s hustle and bustle. These green oases provide a breath of fresh air in the midst of our busy lives.

Culinary Delights

A journey through my city is incomplete without indulging in its culinary delights. The city is renowned for its street food, with mouthwatering dishes like chaat, kebabs, and samosas available on every corner. The diverse food scene ensures there’s something to satisfy every palate.

Economic Hub

My city is not just culturally and historically rich but also a thriving economic hub. It hosts numerous industries, businesses, and markets that contribute significantly to India’s economy. The city’s economic prosperity makes it a land of opportunities for people from all walks of life.

Conclusion of Essay on My City

In conclusion, my city in India is a treasure trove of history, culture, and modernity. Its historical significance, cultural diversity, architectural marvels, and educational opportunities make it a unique and special place. The green oases offer a soothing escape, while the culinary delights tantalize the taste buds. As an economic hub, it plays a pivotal role in the nation’s growth and development. My city is more than just a geographical location; it’s a source of pride and inspiration for all who call it home. So, come and explore the wonders of my city in India, and you’ll discover why it holds a special place in the hearts of its residents and visitors alike.

Also Check: Simple Guide on How To Write An Essay

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My City Essay

My city, New Delhi , has everything a prime city needs – diverse people, fantastic architecture, and particularly delectable food. I was born in this city, and my family has lived here for decades. I am forever grateful to my city for giving me cheerful and unforgettable memories. Here are a few sample essays on “My City”.

100 Words Essay On My City

I live in New Delhi. It is one of the most populated cities in India. My city is famous for its remarkable architecture. Everyday, millions of tourists from all over the world visit my city to experience its rich culture and astounding architecture, such as the Red Fort built by Shah Jahan and Qutub Minar, built by Qutb-din-Aibak.

My city also has great historical importance. It has been the centre of many previous empires, and even now, it is the capital of India. I love my city, and in the future, after becoming a successful person, I would like to live in this city with my family and friends.

200 Words Essay On My City

I was born and brought up in New Delhi. My city is one of the busiest cities in the country. Delhi is crowded and filled with marketplaces such as Sarojini Nagar and Connaught Place, which are flocked by thousands of shoppers daily.

Education And Work | Delhi also has many educational institutes and coaching centres. Students from all over the country come here to prepare for their dream jobs. Many huge multinational companies like Google and Microsoft have their offices here and therefore it has a large working population that lives here and provides their services.

Pollution | Unfortunately, my city is one of the most polluted cities in the world because of the numerous development and construction projects that are perpetually on. It is also home to a lot of morning traffic as people commute to and fro work in buses and cars.

Diversity | Since it is the capital city of India, people from different parts of the country relocate to Delhi, resulting in an amazing transfusion of culture. Even my school has children coming from different cultures and practices.

I love my city, and I especially enjoy its diversity and mixed culture.However, I just wish that the government and citizens could be a little more conscious about the alarming pollution levels.

500 Words Essay On My City

New Delhi, the city I proudly call my home, has been a centre of art, architecture, culture, and trade for centuries. It has a population of over one crore and is situated on the banks of the Yamuna river. I have been living in this city for 18 years. Since the population is huge, most of us in Delhi live in apartments built in high-rise buildings.

An Urban Centre

The city is closely woven with a vast metro network connecting it to other metropolises in the National Capital Region. My city has an effective public transportation system, and lakhs of people travel by the Delhi Transport Corporation (DTC) buses and the metro, on a daily basis. A major part of the population of my city consists of the younger generation studying in colleges or working in offices.

Places To See

There are many other marketplaces in my city. New Delhi also has many malls, cafés, and parks. The parks in my city are lovely, such as the Lodhi Garden, Central Park, and the Garden of Five Senses, and are always flocked by visitors.

New Delhi remains a big hustle and bustle the whole day, even at midnight. It is an urban centre in the true sense.

Architecture

Delhi has a rich history and numerous monuments, such as mosques, forts, and mausoleums. Places such as India Gate, Red Fort, Jantar Mantar, and Jama Masjid are architectural marvels and have great historical importance. Many great rulers and historically important figures have their tombs in my city. Delhi is also home to the Rashtrapati Bhavan and the Parliament of India. I am always left in awe whenever I visit these monuments.

Foodies’ Heaven

Delhi is famous for its food. Parathas from the Paratha Gali in Chandni Chowk, Momos in Lajpat Nagar, and chicken stalls in Jama Masjid are enjoyed by tourists and visitors worldwide. From roadside stalls to lavish and expensive restaurants, you can always find good food in my city, for your taste buds to relish. My favourite food is the momos, famous as “Delhi ke momos” in the country.

What I Love About Delhi

Although there is hardly anything about Delhi that I do not like, here are a few things I love the most about my city:-

I love travelling by metro. The metro in my city is very clean, fast, and affordable. I love to explore my city.

I have explored the bazaars and many of my favourite places numerous times with my friends. Likewise, I am particularly fond of the Sarojini Market in my city because it has cheap clothes and great food stalls.

The best place in my city is the Delhi zoo. I love watching different kinds of animals. My favourite animal in the zoo is the giraffe. I also like watching different types of birds.

Despite the problem of alarming pollution levels, I love my city for what it is. It still is a beautiful place to live and has so much to offer, being the capital of India. My city has played a huge role in making me the person I am today. It has been home of my parents and grandparents for years. I have fond memories of my city which I can never part away with. Everything about my city is cherishable and unique to me.

Explore Career Options (By Industry)

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Bio Medical Engineer

The field of biomedical engineering opens up a universe of expert chances. An Individual in the biomedical engineering career path work in the field of engineering as well as medicine, in order to find out solutions to common problems of the two fields. The biomedical engineering job opportunities are to collaborate with doctors and researchers to develop medical systems, equipment, or devices that can solve clinical problems. Here we will be discussing jobs after biomedical engineering, how to get a job in biomedical engineering, biomedical engineering scope, and salary. 

Data Administrator

Database professionals use software to store and organise data such as financial information, and customer shipping records. Individuals who opt for a career as data administrators ensure that data is available for users and secured from unauthorised sales. DB administrators may work in various types of industries. It may involve computer systems design, service firms, insurance companies, banks and hospitals.

Ethical Hacker

A career as ethical hacker involves various challenges and provides lucrative opportunities in the digital era where every giant business and startup owns its cyberspace on the world wide web. Individuals in the ethical hacker career path try to find the vulnerabilities in the cyber system to get its authority. If he or she succeeds in it then he or she gets its illegal authority. Individuals in the ethical hacker career path then steal information or delete the file that could affect the business, functioning, or services of the organization.

Data Analyst

The invention of the database has given fresh breath to the people involved in the data analytics career path. Analysis refers to splitting up a whole into its individual components for individual analysis. Data analysis is a method through which raw data are processed and transformed into information that would be beneficial for user strategic thinking.

Data are collected and examined to respond to questions, evaluate hypotheses or contradict theories. It is a tool for analyzing, transforming, modeling, and arranging data with useful knowledge, to assist in decision-making and methods, encompassing various strategies, and is used in different fields of business, research, and social science.

Geothermal Engineer

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Remote Sensing Technician

Individuals who opt for a career as a remote sensing technician possess unique personalities. Remote sensing analysts seem to be rational human beings, they are strong, independent, persistent, sincere, realistic and resourceful. Some of them are analytical as well, which means they are intelligent, introspective and inquisitive. 

Remote sensing scientists use remote sensing technology to support scientists in fields such as community planning, flight planning or the management of natural resources. Analysing data collected from aircraft, satellites or ground-based platforms using statistical analysis software, image analysis software or Geographic Information Systems (GIS) is a significant part of their work. Do you want to learn how to become remote sensing technician? There's no need to be concerned; we've devised a simple remote sensing technician career path for you. Scroll through the pages and read.

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The role of geotechnical engineer in mining includes designing and determining the type of foundations, earthworks, and or pavement subgrades required for the intended man-made structures to be made. Geotechnical engineering jobs are involved in earthen and concrete dam construction projects, working under a range of normal and extreme loading conditions. 

Cartographer

How fascinating it is to represent the whole world on just a piece of paper or a sphere. With the help of maps, we are able to represent the real world on a much smaller scale. Individuals who opt for a career as a cartographer are those who make maps. But, cartography is not just limited to maps, it is about a mixture of art , science , and technology. As a cartographer, not only you will create maps but use various geodetic surveys and remote sensing systems to measure, analyse, and create different maps for political, cultural or educational purposes.

Budget Analyst

Budget analysis, in a nutshell, entails thoroughly analyzing the details of a financial budget. The budget analysis aims to better understand and manage revenue. Budget analysts assist in the achievement of financial targets, the preservation of profitability, and the pursuit of long-term growth for a business. Budget analysts generally have a bachelor's degree in accounting, finance, economics, or a closely related field. Knowledge of Financial Management is of prime importance in this career.

Product Manager

A Product Manager is a professional responsible for product planning and marketing. He or she manages the product throughout the Product Life Cycle, gathering and prioritising the product. A product manager job description includes defining the product vision and working closely with team members of other departments to deliver winning products.  

Underwriter

An underwriter is a person who assesses and evaluates the risk of insurance in his or her field like mortgage, loan, health policy, investment, and so on and so forth. The underwriter career path does involve risks as analysing the risks means finding out if there is a way for the insurance underwriter jobs to recover the money from its clients. If the risk turns out to be too much for the company then in the future it is an underwriter who will be held accountable for it. Therefore, one must carry out his or her job with a lot of attention and diligence.

Finance Executive

Operations manager.

Individuals in the operations manager jobs are responsible for ensuring the efficiency of each department to acquire its optimal goal. They plan the use of resources and distribution of materials. The operations manager's job description includes managing budgets, negotiating contracts, and performing administrative tasks.

Bank Probationary Officer (PO)

Investment director.

An investment director is a person who helps corporations and individuals manage their finances. They can help them develop a strategy to achieve their goals, including paying off debts and investing in the future. In addition, he or she can help individuals make informed decisions.

Welding Engineer

Welding Engineer Job Description: A Welding Engineer work involves managing welding projects and supervising welding teams. He or she is responsible for reviewing welding procedures, processes and documentation. A career as Welding Engineer involves conducting failure analyses and causes on welding issues. 

Transportation Planner

A career as Transportation Planner requires technical application of science and technology in engineering, particularly the concepts, equipment and technologies involved in the production of products and services. In fields like land use, infrastructure review, ecological standards and street design, he or she considers issues of health, environment and performance. A Transportation Planner assigns resources for implementing and designing programmes. He or she is responsible for assessing needs, preparing plans and forecasts and compliance with regulations.

An expert in plumbing is aware of building regulations and safety standards and works to make sure these standards are upheld. Testing pipes for leakage using air pressure and other gauges, and also the ability to construct new pipe systems by cutting, fitting, measuring and threading pipes are some of the other more involved aspects of plumbing. Individuals in the plumber career path are self-employed or work for a small business employing less than ten people, though some might find working for larger entities or the government more desirable.

Construction Manager

Individuals who opt for a career as construction managers have a senior-level management role offered in construction firms. Responsibilities in the construction management career path are assigning tasks to workers, inspecting their work, and coordinating with other professionals including architects, subcontractors, and building services engineers.

Urban Planner

Urban Planning careers revolve around the idea of developing a plan to use the land optimally, without affecting the environment. Urban planning jobs are offered to those candidates who are skilled in making the right use of land to distribute the growing population, to create various communities. 

Urban planning careers come with the opportunity to make changes to the existing cities and towns. They identify various community needs and make short and long-term plans accordingly.

Highway Engineer

Highway Engineer Job Description:  A Highway Engineer is a civil engineer who specialises in planning and building thousands of miles of roads that support connectivity and allow transportation across the country. He or she ensures that traffic management schemes are effectively planned concerning economic sustainability and successful implementation.

Environmental Engineer

Individuals who opt for a career as an environmental engineer are construction professionals who utilise the skills and knowledge of biology, soil science, chemistry and the concept of engineering to design and develop projects that serve as solutions to various environmental problems. 

Naval Architect

A Naval Architect is a professional who designs, produces and repairs safe and sea-worthy surfaces or underwater structures. A Naval Architect stays involved in creating and designing ships, ferries, submarines and yachts with implementation of various principles such as gravity, ideal hull form, buoyancy and stability. 

Orthotist and Prosthetist

Orthotists and Prosthetists are professionals who provide aid to patients with disabilities. They fix them to artificial limbs (prosthetics) and help them to regain stability. There are times when people lose their limbs in an accident. In some other occasions, they are born without a limb or orthopaedic impairment. Orthotists and prosthetists play a crucial role in their lives with fixing them to assistive devices and provide mobility.

Veterinary Doctor

Pathologist.

A career in pathology in India is filled with several responsibilities as it is a medical branch and affects human lives. The demand for pathologists has been increasing over the past few years as people are getting more aware of different diseases. Not only that, but an increase in population and lifestyle changes have also contributed to the increase in a pathologist’s demand. The pathology careers provide an extremely huge number of opportunities and if you want to be a part of the medical field you can consider being a pathologist. If you want to know more about a career in pathology in India then continue reading this article.

Speech Therapist

Gynaecologist.

Gynaecology can be defined as the study of the female body. The job outlook for gynaecology is excellent since there is evergreen demand for one because of their responsibility of dealing with not only women’s health but also fertility and pregnancy issues. Although most women prefer to have a women obstetrician gynaecologist as their doctor, men also explore a career as a gynaecologist and there are ample amounts of male doctors in the field who are gynaecologists and aid women during delivery and childbirth. 

An oncologist is a specialised doctor responsible for providing medical care to patients diagnosed with cancer. He or she uses several therapies to control the cancer and its effect on the human body such as chemotherapy, immunotherapy, radiation therapy and biopsy. An oncologist designs a treatment plan based on a pathology report after diagnosing the type of cancer and where it is spreading inside the body.

Audiologist

The audiologist career involves audiology professionals who are responsible to treat hearing loss and proactively preventing the relevant damage. Individuals who opt for a career as an audiologist use various testing strategies with the aim to determine if someone has a normal sensitivity to sounds or not. After the identification of hearing loss, a hearing doctor is required to determine which sections of the hearing are affected, to what extent they are affected, and where the wound causing the hearing loss is found. As soon as the hearing loss is identified, the patients are provided with recommendations for interventions and rehabilitation such as hearing aids, cochlear implants, and appropriate medical referrals. While audiology is a branch of science that studies and researches hearing, balance, and related disorders.

Hospital Administrator

The hospital Administrator is in charge of organising and supervising the daily operations of medical services and facilities. This organising includes managing of organisation’s staff and its members in service, budgets, service reports, departmental reporting and taking reminders of patient care and services.

For an individual who opts for a career as an actor, the primary responsibility is to completely speak to the character he or she is playing and to persuade the crowd that the character is genuine by connecting with them and bringing them into the story. This applies to significant roles and littler parts, as all roles join to make an effective creation. Here in this article, we will discuss how to become an actor in India, actor exams, actor salary in India, and actor jobs. 

Individuals who opt for a career as acrobats create and direct original routines for themselves, in addition to developing interpretations of existing routines. The work of circus acrobats can be seen in a variety of performance settings, including circus, reality shows, sports events like the Olympics, movies and commercials. Individuals who opt for a career as acrobats must be prepared to face rejections and intermittent periods of work. The creativity of acrobats may extend to other aspects of the performance. For example, acrobats in the circus may work with gym trainers, celebrities or collaborate with other professionals to enhance such performance elements as costume and or maybe at the teaching end of the career.

Video Game Designer

Career as a video game designer is filled with excitement as well as responsibilities. A video game designer is someone who is involved in the process of creating a game from day one. He or she is responsible for fulfilling duties like designing the character of the game, the several levels involved, plot, art and similar other elements. Individuals who opt for a career as a video game designer may also write the codes for the game using different programming languages.

Depending on the video game designer job description and experience they may also have to lead a team and do the early testing of the game in order to suggest changes and find loopholes.

Radio Jockey

Radio Jockey is an exciting, promising career and a great challenge for music lovers. If you are really interested in a career as radio jockey, then it is very important for an RJ to have an automatic, fun, and friendly personality. If you want to get a job done in this field, a strong command of the language and a good voice are always good things. Apart from this, in order to be a good radio jockey, you will also listen to good radio jockeys so that you can understand their style and later make your own by practicing.

A career as radio jockey has a lot to offer to deserving candidates. If you want to know more about a career as radio jockey, and how to become a radio jockey then continue reading the article.

Choreographer

The word “choreography" actually comes from Greek words that mean “dance writing." Individuals who opt for a career as a choreographer create and direct original dances, in addition to developing interpretations of existing dances. A Choreographer dances and utilises his or her creativity in other aspects of dance performance. For example, he or she may work with the music director to select music or collaborate with other famous choreographers to enhance such performance elements as lighting, costume and set design.

Videographer

Multimedia specialist.

A multimedia specialist is a media professional who creates, audio, videos, graphic image files, computer animations for multimedia applications. He or she is responsible for planning, producing, and maintaining websites and applications. 

Social Media Manager

A career as social media manager involves implementing the company’s or brand’s marketing plan across all social media channels. Social media managers help in building or improving a brand’s or a company’s website traffic, build brand awareness, create and implement marketing and brand strategy. Social media managers are key to important social communication as well.

Copy Writer

In a career as a copywriter, one has to consult with the client and understand the brief well. A career as a copywriter has a lot to offer to deserving candidates. Several new mediums of advertising are opening therefore making it a lucrative career choice. Students can pursue various copywriter courses such as Journalism , Advertising , Marketing Management . Here, we have discussed how to become a freelance copywriter, copywriter career path, how to become a copywriter in India, and copywriting career outlook. 

Careers in journalism are filled with excitement as well as responsibilities. One cannot afford to miss out on the details. As it is the small details that provide insights into a story. Depending on those insights a journalist goes about writing a news article. A journalism career can be stressful at times but if you are someone who is passionate about it then it is the right choice for you. If you want to know more about the media field and journalist career then continue reading this article.

For publishing books, newspapers, magazines and digital material, editorial and commercial strategies are set by publishers. Individuals in publishing career paths make choices about the markets their businesses will reach and the type of content that their audience will be served. Individuals in book publisher careers collaborate with editorial staff, designers, authors, and freelance contributors who develop and manage the creation of content.

In a career as a vlogger, one generally works for himself or herself. However, once an individual has gained viewership there are several brands and companies that approach them for paid collaboration. It is one of those fields where an individual can earn well while following his or her passion. 

Ever since internet costs got reduced the viewership for these types of content has increased on a large scale. Therefore, a career as a vlogger has a lot to offer. If you want to know more about the Vlogger eligibility, roles and responsibilities then continue reading the article. 

Individuals in the editor career path is an unsung hero of the news industry who polishes the language of the news stories provided by stringers, reporters, copywriters and content writers and also news agencies. Individuals who opt for a career as an editor make it more persuasive, concise and clear for readers. In this article, we will discuss the details of the editor's career path such as how to become an editor in India, editor salary in India and editor skills and qualities.

Linguistic meaning is related to language or Linguistics which is the study of languages. A career as a linguistic meaning, a profession that is based on the scientific study of language, and it's a very broad field with many specialities. Famous linguists work in academia, researching and teaching different areas of language, such as phonetics (sounds), syntax (word order) and semantics (meaning). 

Other researchers focus on specialities like computational linguistics, which seeks to better match human and computer language capacities, or applied linguistics, which is concerned with improving language education. Still, others work as language experts for the government, advertising companies, dictionary publishers and various other private enterprises. Some might work from home as freelance linguists. Philologist, phonologist, and dialectician are some of Linguist synonym. Linguists can study French , German , Italian . 

Public Relation Executive

Travel journalist.

The career of a travel journalist is full of passion, excitement and responsibility. Journalism as a career could be challenging at times, but if you're someone who has been genuinely enthusiastic about all this, then it is the best decision for you. Travel journalism jobs are all about insightful, artfully written, informative narratives designed to cover the travel industry. Travel Journalist is someone who explores, gathers and presents information as a news article.

Quality Controller

A quality controller plays a crucial role in an organisation. He or she is responsible for performing quality checks on manufactured products. He or she identifies the defects in a product and rejects the product. 

A quality controller records detailed information about products with defects and sends it to the supervisor or plant manager to take necessary actions to improve the production process.

Production Manager

Merchandiser.

A QA Lead is in charge of the QA Team. The role of QA Lead comes with the responsibility of assessing services and products in order to determine that he or she meets the quality standards. He or she develops, implements and manages test plans. 

Metallurgical Engineer

A metallurgical engineer is a professional who studies and produces materials that bring power to our world. He or she extracts metals from ores and rocks and transforms them into alloys, high-purity metals and other materials used in developing infrastructure, transportation and healthcare equipment. 

Azure Administrator

An Azure Administrator is a professional responsible for implementing, monitoring, and maintaining Azure Solutions. He or she manages cloud infrastructure service instances and various cloud servers as well as sets up public and private cloud systems. 

AWS Solution Architect

An AWS Solution Architect is someone who specializes in developing and implementing cloud computing systems. He or she has a good understanding of the various aspects of cloud computing and can confidently deploy and manage their systems. He or she troubleshoots the issues and evaluates the risk from the third party. 

Computer Programmer

Careers in computer programming primarily refer to the systematic act of writing code and moreover include wider computer science areas. The word 'programmer' or 'coder' has entered into practice with the growing number of newly self-taught tech enthusiasts. Computer programming careers involve the use of designs created by software developers and engineers and transforming them into commands that can be implemented by computers. These commands result in regular usage of social media sites, word-processing applications and browsers.

ITSM Manager

Information security manager.

Individuals in the information security manager career path involves in overseeing and controlling all aspects of computer security. The IT security manager job description includes planning and carrying out security measures to protect the business data and information from corruption, theft, unauthorised access, and deliberate attack 

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My City Essay – 10 Lines, Short And Long Essay For Kids

Key Points To Remember When Writing An Essay On ‘My City’ For Lower Primary Classes

10 lines on ‘my city’ for kids, a paragraph on ‘my city’ for children, short essay on ‘my city’ for kids, long essay on ‘my city’ for children, what will your child learn from this essay.

My city is a great topic to write on because there is so much one can add to an essay on this! Beyond the physical aspect of it, everyone shares an emotional connection with their city. The name of the city, the climate, where I live, and why I love my city are questions to be answered in an essay on “My City” for classes 1, 2, and 3. Sometimes you may change cities, which means switching to a different environment, but the city you would have spent more time in will hold a special place in your heart. By writing an essay on ‘my city’, kids will know what to explore and write about. In simple terms, let them have fun and let the words do the magic. Below is a guide on how to write an essay on “My City” for lower primary classes.

You should always start your essay on “My City” with an introduction and get into the location’s history. Gently walking readers through a new region is the goal of an essay. Given here are some key points to remember when writing an essay:

• List out the city’s name, landmarks, and how far it is away from the capital; if it is the capital city, write a different story.
• Talk about famous educational institutions, schools, and colleges in the city.
• What is the city famous for and why tourists should visit – a few lines on these have to be added.
• How the kids perceive their city, emotion, and local connections needs to be explored and expressed in simple sentences.

Living in any city comes with its perks and downsides. However, all kids love their city and share a special bond with it. A city is beautiful and has many sights to explore, including hidden gems. Here are 10 lines for an essay on “My City” for classes 1 & 2:

• My city is stunning, and I love its layout and vision.
• The people in my city are warm, kind, and friendly.
• I love making new friends in my city and look forward to attending school.
• My city is a home for my family; I live with my parents in the city.
• My city has good services such as food markets, shops, hospitals, and many civic amenities.
• I love to go for a morning walk in the many parks my city has.
• There is a lot to learn about my city and many things I do not know.
• I was two years old when my parents moved to Noida.
• I plan to live in my city with my grandparents and not go elsewhere until I grow up.
• I want to study and get a job in my city because of how comfortable my life is here.

A lot can be learnt by writing an essay on “My City”. It allows kids to see the city they live in with a new light and perspective:

A city can not only be defined based on geographical details, as it carries a significant part of one’s persona. There are so many cities in India, but there is nothing like my city. I live in the capital city of India, New Delhi, and my city is known for its dazzling and warm aura. People also call it mini India, as you will find a mixed population of all cultures and sensibilities here. Famous for monuments like Red Fort, India Gate, Qutub Minar, Jama Masjid, etc., my city has a story for everything. One can find an enriching collection of art, politics, knowledge, and IT here. If you ever visit my city, explore places like Cannought Place, Delhi Haat, Chandni Chowk, etc., to get the local flavour and ambience.

Writing an essay on “My City” can be an enlightening journey for kids as they will be able to share their clear and fresh vision of it. Here is a short essay on my city:

I love my city, Banglore, and I think it’s the best place in the world. It is the land where I grew up and currently live with my parents. I’ve made many fond memories and friends here. I’ve visited many exciting attractions and have gone on picnics hosted by my school. Bangalore has many wilderness projects, and animal lovers can visit the Venugopala Wildlife Park and Bandipur National Park in Mysore. Mysore is 150 km away from Banglore. Other exciting places to go sightseeing are the Bangalore Palace, Forum Mall, and ISKCON Temple. You can also check out the Wonderla Amusement Park, a famous tourist and entertainment attraction. The people here show tremendous hospitality, and my city is also a centre for education and wellness. Many schools, medical institutions, and colleges are found here. Banglore is considered the hub for engineering colleges and IT companies. Banglore is also known for its fast-paced urban lifestyle, but people take time to relax, chill and have fun times with family and friends.

Everybody falls in love with the city they stay in and love to spend time there. Here is how you write an essay for class 3 on “My City”:

Bangalore is my favourite place to live because I was born and raised there. MG road is my favourite area to visit because I can enjoy good food from restaurants like Mcdonald’s and Pizza Hut. It is the hub of recreational and commercial activities in the city. Blossom’s bookhouse in Church Street is my go-to spot because I can buy my favourite comic books and novels there. The buffets in my city are a great hit, and I love Onesta, which is famous for its unlimited pizza meals.

I go to Lal Bagh with my parents during summer vacation and relax there. It is in Jayanagar and a haven for nature lovers. The gates are big, and the scenery spreads across 240 acres of land, having more than 1854 varieties of plants. I love my city and plan to continue living there even after graduating. Finding a job in my city is not hard, and the education here is excellent. Many high school graduates get summer jobs, and I look forward to working on many small projects when I get free time. I can’t wait to explore the several opportunities found in my city. I feel fortunate to live in my town, and my friends feel the same way too.

History Of My City

My city was established in 1956 and became the capital of Mysore after India’s independence. Two separate settlements merged into one in 1949. Bangalore is my city, and it has a population of over 10 million people.

Beautiful Places To Visit In My City

Some of the most beautiful places to visit in my city are Cubbon Park, Brigade Road, Nandi Hills, Lal Bagh, etc.

Facilities Available In My City

There are various facilities available in my city, such as healthcare, fitness, food and beauty services, and civic amenities.

Your child will learn how to navigate their city and the different popular sights. They will also learn what makes their city special and the top reasons why they love it.

Now that you know enough about your city, you can get started on writing an essay on “My City”. Be sure to give your child plenty of inspiration by talking about famous sights and telling popular tales about your city.

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Essay on Rajkot | Rajkot Essay for Students and Children in English

Essay on Rajkot:  This city is located in the Saurashtra region in the state of Gujarat. Rajkot is considered to have a high rate of the population of around 1,390,640 people. However, there are a large number of people with a different religious background that coexist peacefully in Rajkot.

The area taken up by the city is around 170 km. Besides, the distance between the capital city, i.e. Gandhinagar and Rajkot, is about 245 km. Moreover, this city also offers high-quality hospital facilities.

You can also find more  Essay Writing  articles on events, persons, sports, technology and many more.

Long and Short Essays on Rajkot for Students and Kids in English

We are providing students with essay samples on a long essay of 500 words and a short essay of 150 words on the topic Rajkot for reference.

Long Essay on Rajkot 500 Words in English

Long Essay on Rajkot is usually given to classes 7, 8, 9, and 10.

This city is located in the western part of India. It is primarily a commercial town. Rajkot is mostly known for its variety of foods, sweets, traditional snacks, handicrafts, festival celebrations, and its distinct culture.

The Jadeja Rajput Clan did the establishment of the city in the year 1612. It is widely popular as the town where Mahatma Gandhi completed his early education.

Some of the places that are popular in Rajkot amongst the visitors are Lang Library, Watson Museum, Jubilee Garden, Kaba Gandhi No Delo, etc. These are some of the elegant places present in the city.

Rajkot provides a range of traditional and modern shopping malls across the entire city. One of the famous malls in Rajkot includes the crystal mall. This mall offers fashionable clothes that are popular across the globe. There are several local brands provided in these malls, as well.

Moreover, there are several accessories and clothes available that represent a combination of both traditional and modern wares of Rajkot. The markets present in this city represent an impressive set of collections. These markets also keep fashionable and colourful clothes.

The most famous market in this street is the Dharmendra Road Bazaar, where one can quickly get a different variety of traditional clothes. The markets, namely Soni Bazaar and BangdiBazaar, are famous for selling jewelling across the city. The rarest demand for footwear known as the Mochi Bazaar is also including in the renowned shopping destinations.

This city is popularly known as the “Rangiloo Rajkot”. In other words, “Colorful Rajkot”. Rajkot is considered as the city of painting. Thus, it is referred to as the “Chitranagri”.

There are several mesmerizing historical destinations present in this city that attract people throughout the world. Some of the magnificent places in Rajkot are Midtown Library, Saurashtra Cricket Stadium, Rotary Dolls Museum, Connaught Hall, and so on.

Due to the location of this city nearer to Gujrat, the cuisine available in Rajkot is very similar to the complete meal of Gujrat. The central theme for a meal prepared in Gujrat is Thali. This thali is a combination of Dal, Rice, Chappati, Desserts and other items, which makes it a complete meal. It also includes a particular type of curry which is very well-known in the city of Rajkot.

Moreover, Khichdi is also served to the people who come looking for a lighter meal and even item based on Mango is served during summer.

As for desserts, Malpua, Basundi and Shrikhand are available as a choice. These precious items are a must-have for the visitors looking to enjoy a meal which gives them delights of even Gujrati meal. Also, Fafda, Farsan and Dhokhla are available in various sweet and dairy stores located all over this city.

The people belonging to Rajkot are known to have a very polite and cheerful nature. Therefore, the celebrations of several famous festivals are filled with excitement and joy.

Janmashtami in Rajkot is celebrated for the entire seven days while the Ganesh Puja celebration lasts for ten days. Moreover, both Christmas and Diwali are also celebrated for a whole week.

Short Essay on Rajkot 150 Words in English

Short Essay on Rajkot is usually given to classes 1, 2, 3, 4, 5, and 6.

Rajkot is considered to be one of the fastest developing urban areas in the country. This city is situated on the river banks of Aji and Nyari. This city is also included in the top ten list of the cleanest Indian towns. Rajkot is referred to as the administrative head office of the district of Rajkot.

You can now access more Essay Writing on this topic and many more.

This city is situated at the centre of the Saurashtra comprising of dry temperature and tropical weight. The temperature of this place is considered to be pleasant in November and February. Although, the summer season in Rajkot is scorching and ranges up to 45 degree Celsius.

This city is widely known as a multilingual town. The primary languages that are used by the people in Rajkot are English, Malayalam, Sindhi, Gujarati, Urdu, Hindi, etc. However, there are some popular languages amongst these, including Gujarati, Hindi, Urdu, and English. Rajkot is famous for the availability of fresh and tasty food items.

10 Lines on Rajkot Essay in English

1. This city is known to possess its genre of local music known as “Dayro”. 2. Rajkot is widely popular for providing purest gold across the country. 3. Rajkot is ranked fourth for the list of urban areas that are largest in Gujrat. 4. This city is famous for being the industrial, pedagogic, and economic centre of Saurashtra. 5. In the earlier years of 1943 to 1956, it was known as the Saurashtra state’s capital. 6. The literacy rate of this city is considered to be higher than 82.20% of the entire national average. 7. Rajkot is also considered to be one of the cleanest and greenest cities in India and ranks 6th in the list of cleanest Indian towns. 8. There are several types of languages that are used in Rajkot, including English, Urdu, Sindhi, Tamil, Hindi, Malayalam, Marathi, etc. 9. This city is widely referred to as “Colorful Rajkot”. 10. The most famous “Rotary Dolls Museum” is situated in Rajkot.

FAQ’s on Rajkot Essay

Question 1. Which months are best for visiting Rajkot?

Answer:  It is best to visit Rajkot between November and March.

Question 2. What are the famous dishes available in Rajkot?

Answer:  The famous foods available in this city are Undhiyu, Khichdi, Rotolo, Handva, Thepla, and so on.

Question 3. What are the most famous tourist destinations in Rajkot?

Answer:  It includes places like Watson Museum, Mahatma Gandhi Museum, Rotary Dolls Museum, etc.

Question 4. Why is the city of Rajkot famous?

Answer:  This city is famous mostly for its silk work, parts of the watch, and gold jewellery.

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Hire an expert from our writing services to learn from and ace your next task. We are your one-stop-shop for academic success.

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Progressive delivery is highly recommended for your order. This additional service allows tracking the writing process of big orders as the paper will be sent to you for approval in parts/drafts* before the final deadline.

What is more, it guarantees:

• 30 days of free revision;
• A top writer and the best editor;
• A personal order manager.

* You can read more about this service here or please contact our Support team for more details.

It is a special offer that now costs only +15% to your order sum!

Would you like to order Progressive delivery for your paper?

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Our Service Is Kept Secret

We are here to help you with essays and not to expose your identity. Your anonymity is our priority as we know it is yours. No personal data is collected on our service and no third parties can snoop through your info. All our communication is encrypted and stays between you and your writer. You receive your work via email so no one will have access to it except you. We also use encrypted payment systems with secure gateways for extra security.

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Experts to Provide You Writing Essays Service.

You can assign your order to:

• Basic writer. In this case, your paper will be completed by a standard author. It does not mean that your paper will be of poor quality. Before hiring each writer, we assess their writing skills, knowledge of the subjects, and referencing styles. Furthermore, no extra cost is required for hiring a basic writer.
• Advanced writer. If you choose this option, your order will be assigned to a proficient writer with a high satisfaction rate.
• TOP writer. If you want your order to be completed by one of the best writers from our essay writing service with superb feedback, choose this option.
• Your preferred writer. You can indicate a specific writer's ID if you have already received a paper from him/her and are satisfied with it. Also, our clients choose this option when they have a series of assignments and want every copy to be completed in one style.

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Don’t Drown In Assignments — Hire an Essay Writer to Help!

Does a pile of essay writing prevent you from sleeping at night? We know the feeling. But we also know how to help it. Whenever you have an assignment coming your way, shoot our 24/7 support a message or fill in the quick 10-minute request form on our site. Our essay help exists to make your life stress-free, while still having a 4.0 GPA. When you pay for an essay, you pay not only for high-quality work but for a smooth experience. Our bonuses are what keep our clients coming back for more. Receive a free originality report, have direct contact with your writer, have our 24/7 support team by your side, and have the privilege to receive as many revisions as required.

We have the ultimate collection of writers in our portfolio, so once you ask us to write my essay, we can find you the most fitting one according to your topic. The perks of having highly qualified writers don't end there. We are able to help each and every client coming our way as we have specialists to take on the easiest and the hardest tasks. Whatever essay writing you need help with, let it be astronomy or geography, we got you covered! If you have a hard time selecting your writer, contact our friendly 24/7 support team and they will find you the most suitable one. Once your writer begins the work, we strongly suggest you stay in touch with them through a personal encrypted chat to make any clarifications or edits on the go. Even if miscommunications do happen and you aren't satisfied with the initial work, we can make endless revisions and present you with more drafts ASAP. Payment-free of course. Another reason why working with us will benefit your academic growth is our extensive set of bonuses. We offer a free originality report, title, and reference page, along with the previously mentioned limitless revisions.

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We never disclose your personal information to any third parties

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5 Signs of a quality essay writer service

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You get wide range of high quality services from our professional team

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