Substantive action: The Italian corporate ESG response to Climate Policy uncertainty

Growing global climate pressures have led to stricter policies, but climate policy uncertainty (CPU) constitutes a significant risk to the low-carbon transition. This study examines how Climate Policy Uncertainty (CPU) influences corporate ESG behavior in Italy, which has strong ESG accountability but fragmented climate governance. Using panel data from 255 Italian listed firms from 2010 to 2023, we find that CPU drives significant improvements in ESG performance, with measurable reductions in carbon and pollutant emissions, suggesting substantive rather than symbolic responses. However, Small and medium-sized enterprises (SMEs) exhibit weaker improvements due to resource constraints. Our findings contribute to the debate on corporate strategies under regulatory uncertainty and offer insights for policymakers designing climate governance frameworks and for firms seizing the transition opportunity.