Abstract This study investigates the economic and environmental impacts of China’s Green Finance Reform and Innovation Pilot Zone (GFRIPZ) program, a climate policy designed to promote sustainability by reducing carbon emissions intensity (CEI) among high-energy-consuming firms. Using a dataset of Chinese A-share listed companies, triple-difference estimations reveal that the GFRIPZ program significantly lowers CEI. This outcome is partly driven by increased investments in green innovation, as firms enhance their research and development efforts to align with environmental goals. Despite these advancements, the program presents a trade-off by exerting downward pressure on profitability. However, green finance policies mitigate financing constraints, supporting firms’ financial stability under sustainability-focused reforms. Our findings explain the interplay between environmental outcomes and financial performance, highlighting the necessity of balancing sustainable development and economic growth.
Liu et al. (Thu,) studied this question.