Structural parameter estimate.

In the process of development, global economies are prioritizing environmental protection and firms are also recognizing the importance of minimizing environmental impact during production along with maximization of profits through green investments. It is vivid that green investments are vital for environmental preservation. So this paper contributes to literature by investigating the role of internal and external factors affecting the decision making of Chinese firms regarding adoption of green investments and impact of green investments on environmental, social, and economic performance of firms. The data is collected from directors/senior managers of the firms. We received 463 valid responses from listed companies with Shenzhen, Beijing, and Shanghai Stock Exchange. The “structural equation modeling” with “maximum likelihood estimation” is employed for empirical analysis. The empirical findings reveal that adaptation to climate change and its mitigation is the most important driver of green investment. Moreover, green investment positively contributes to enhancing the social, economic, and environmental performances of Chinese firms. Based on the findings of the study, green investment should be adopted as a corporate strategy by firms for profit maximization, competitive advantage, and improvement in social well-being without compromising the environment. Policy makers can promote green investment by offering policy instruments such as tax incentives, guaranteed credits, grants, and investor education. Training courses may be offered to raise environmental awareness among firms and the general public.