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Green finance responses to global environmental accords: A quasi-natural experiment centered on the Paris Agreement

Author

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  • Hu, Zuwu
  • Li, Hongjuan
  • Liu, Ling

Abstract

The enhanced binding force of international environmental treaties, notably the Paris Agreement, has strengthened institutional expectations for redirecting global capital toward low-carbon sectors. Leveraging the Paris Agreement as an exogenous policy shock, this study employs a Difference-in-Differences model on Chinese provincial panel data from 2001 to 2023 to evaluate its effect on green finance. Results show a significant overall improvement in green finance following the treaty, with provinces characterized by robust fiscal capacity, abundant labor, and stringent environmental regulations benefiting disproportionately. Mechanism tests indicate that the treaty operates by stimulating R&D investment and entrepreneurial activity, which in turn expands green finance. However, physical climate risks are found to mitigate this positive effect. Our findings provide empirical evidence on the role of international treaties in catalyzing domestic green investment and financing.

Suggested Citation

  • Hu, Zuwu & Li, Hongjuan & Liu, Ling, 2026. "Green finance responses to global environmental accords: A quasi-natural experiment centered on the Paris Agreement," Finance Research Letters, Elsevier, vol. 89(C).
    • Handle: RePEc:eee:finlet:v:89:y:2026:i:c:s154461232502519x
    DOI: 10.1016/j.frl.2025.109270
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    JEL classification:

    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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