Using 4724 A-share listed firms in the Chinese stock market from 2009 to 2024, we investigate how CPU, an index constructed from textual analysis of major Chinese newspapers, affects investors' behavior, measured by turnover ratios and abnormal returns. The baseline regression shows that higher CPU significantly reduces stock turnover ratio and abnormal returns, indicating heightened investor caution and negative sentiment. Extended regression with provincial-level CPU further supports these findings. Heterogeneity analysis reveal that low-carbon firms, non-state-owned enterprises (non-SOEs), and firms in Central and Western China are more negatively affected by CPU, while high-carbon firms and SOEs are relatively resilient when facing higher CPU, mainly due to expected policy support and institutional investor dominance. Further mechanism analysis uncovers that ESG performance moderates CPU's effects. Firms with higher ESG ratings experience smaller valuation declines but lower trading volumes. In addition, consumer sentiment mediates CPU's effects. CPU suppresses public confidence, which in turn reduces investor participation and firm valuations. These findings highlight the importance of improving policy transparency, promoting standardized ESG disclosure, and mitigating retail investor overreaction. The study contributes to behavioral and climate finance literature by linking policy-driven uncertainty with micro-level investor responses in a key emerging market.