Source control or end-of-pipe treatment: How green finance policy impacts enterprise carbon intensity

This paper evaluates the impact of green finance on enterprise carbon intensity utilizing the “Green Finance Reform and Innovation Pilot Zone” policy in China as a quasi-natural experiment design. The findings reveal that green finance effectively reduces enterprise carbon intensity, and this conclusion remains robust after a series of robustness checks. The mechanism analysis shows that green finance significantly increases the attention from capital markets, media, and government, while also reducing enterprises’ financing costs. However, under the increased pressure of external scrutiny and reduced financing costs, enterprises do not effectively control carbon emissions at the source. Instead, they increase their end-of-pipe pollution treatment to achieve emission reduction goals. Additionally, using the generalized random forest model in machine learning, this study finds that the proportion of fixed assets and Return on Equity (ROE) contribute most significantly to the heterogeneity of the policy effect. Further analysis reveals that the policy effect strengthens as the proportion of fixed assets increases, but gradually weakens with the rise of ROE.