Green finance and firms' pollution emissions: Evidence from Chinese listed firms

Green finance is a key policy tool for sustainable development. The establishment of Green Finance Reform and Innovation Pilot Zones (GFRIPZs) has become an important driver of green growth. In this study, we used data on A-share listed firms from 2012 through 2023 and treated the 2017 launch of the first GFRIPZs as a quasi-natural experiment. We estimated a difference-in-differences (DID) model to measure the effect of green finance on firm-level pollution emissions. The results showed that GFRIPZs significantly reduce pollution emissions among listed firms. These findings hold after several robustness checks. Further analysis showed that the reduction mainly comes from green innovation, especially end-of-pipe treatment technologies. In contrast, source-control technologies show no clear effect. Heterogeneity tests show stronger effects for state-owned firms, large firms, financially constrained firms, firms facing stricter environmental regulation, and firms with greater government attention. Overall, the evidence indicated that green finance reduces pollution and offers policy guidance for China's green transition.