IDEAS home Printed from https://ideas.repec.org/a/eee/finlet/v89y2026ics154461232502519x.html

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

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S154461232502519X
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.frl.2025.109270?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. He, Yu & Liu, Ruizhi, 2023. "The impact of the level of green finance development on corporate debt financing capacity," Finance Research Letters, Elsevier, vol. 52(C).
    2. Xu, Aiting & Dai, Yujie & Hu, Zhiyuan & Qiu, Keyang, 2025. "Can green finance policy promote inclusive green growth?- Based on the quasi-natural experiment of China's green finance reform and innovation pilot zone," International Review of Economics & Finance, Elsevier, vol. 100(C).
    3. Fan, Hui & Peng, Bufan & Qu, Jing, 2024. "Financial literacy, entrepreneurial activity and entrepreneurial motivation," Finance Research Letters, Elsevier, vol. 68(C).
    4. Tobias Kruse & Myra Mohnen & Misato Sato, 2024. "Do Financial Markets Respond to Green Opportunities?," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 11(3), pages 549-576.
    5. Fahmy, Hany, 2025. "Empty pledges and powerless conventions: How transition climate risks are disrupting financial markets?," International Review of Financial Analysis, Elsevier, vol. 105(C).
    6. Yu, Bo & Liu, Lu & Chen, Hong, 2023. "Can green finance improve the financial performance of green enterprises in China?," International Review of Economics & Finance, Elsevier, vol. 88(C), pages 1287-1300.
    7. Pang, Jing & Liu, Zhaoda & Hou, Wanyue & Tao, Yunqing, 2023. "How does the Paris Agreement affect firm productivity? International evidence," Finance Research Letters, Elsevier, vol. 56(C).
    8. Paula Prenzel & Simona Iammarino, 2021. "Labor Force Aging and the Composition of Regional Human Capital," Economic Geography, Taylor & Francis Journals, vol. 97(2), pages 140-163, March.
    9. Al Mamun, Md & Boubaker, Sabri & Hassan, Md Zakir & Manita, Riadh, 2025. "Towards net zero: Implications of environmental regulations on green finance," Finance Research Letters, Elsevier, vol. 79(C).
    10. Zhou, Mingtao & Ma, Yong, 2025. "Physical vs. Transition climate risks: Asymmetric effects on stock return predictability," International Review of Financial Analysis, Elsevier, vol. 104(PA).
    11. Amir Emami & Shayegheh Ashourizadeh & Shima Sheikhi & Gadaf Rexhepi, 2022. "Entrepreneurial propensity for market analysis in the time of COVID-19: benefits from individual entrepreneurial orientation and opportunity confidence," Review of Managerial Science, Springer, vol. 16(8), pages 2413-2439, November.
    12. Weijiao Ye & Ziqiang Li, 2023. "Will the Grain Imports Competition Effect Reverse Land Green Efficiency of Grain Production? Analysis Based on Virtual Land Trade Perspective," Agriculture, MDPI, vol. 13(12), pages 1-19, November.
    13. Hain, Linda I. & Kölbel, Julian F. & Leippold, Markus, 2022. "Let’s get physical: Comparing metrics of physical climate risk," Finance Research Letters, Elsevier, vol. 46(PB).
    14. Wei, Na, 2024. "Green finance, market integration, and regional economic resilience," Finance Research Letters, Elsevier, vol. 67(PA).
    15. Li, Huijuan & Zhao, Yinfei & Wang, Yong, 2024. "Debt trap or innovation motivation? the impact of public debt on corporate substantive innovation: Evidence from Chinese listed companies," Finance Research Letters, Elsevier, vol. 68(C).
    16. Shoufu Xu & Xuehui He & Longbing Xu, 2018. "Market or government: who plays a decisive role in R&D resource allocation?," China Finance Review International, Emerald Group Publishing Limited, vol. 9(1), pages 110-136, August.
    17. Xiang, Weiming & Ma, Chen, 2025. "Can banking competitiveness stimulate the development of regional green finance?," International Review of Economics & Finance, Elsevier, vol. 103(C).
    18. Michael Spence, 1973. "Job Market Signaling," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 87(3), pages 355-374.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Nie, Shiqi & Wang, Xue & Chen, Yu & Liao, Qian & Li, Yuan, 2025. "Does green finance catalyze green transformation in cultural and creative industries?," International Review of Financial Analysis, Elsevier, vol. 108(PB).
    2. Fan, Xiaoyun & Shen, Xinyan & Wang, Daoping & Zhou, Cier, 2025. "The Paris Agreement and firms’ carbon information disclosure: Honesty or catering?," International Review of Economics & Finance, Elsevier, vol. 99(C).
    3. Cao, Xianfei & Liu, Man & Du, He, 2026. "Green finance and urban economic resilience," Finance Research Letters, Elsevier, vol. 87(C).
    4. Maite Blázquez & Santiago Budr�a, 2012. "Overeducation dynamics and personality," Education Economics, Taylor & Francis Journals, vol. 20(3), pages 260-283, March.
    5. Sènakpon Fidèle A. Dedehouanou & Luca Tiberti & Hilaire G. Houeninvo & Djohodo Inès Monwanou, 2019. "Working while studying: Employment premium or penalty for youth in Benin?," Working Papers PMMA 2019-03, PEP-PMMA.
    6. Ferdinand Thies & Sören Wallbach & Michael Wessel & Markus Besler & Alexander Benlian, 2022. "Initial coin offerings and the cryptocurrency hype - the moderating role of exogenous and endogenous signals," Electronic Markets, Springer;IIM University of St. Gallen, vol. 32(3), pages 1691-1705, September.
    7. Inmaculada Garc�a-Mainar & V�ctor M. Montuenga-G�mez, 2017. "Subjective educational mismatch and signalling in Spain," Documentos de Trabajo dt2017-03, Facultad de Ciencias Económicas y Empresariales, Universidad de Zaragoza.
    8. Feser, Daniel & Runst, Petrik, 2015. "Energy efficiency consultants as change agents? Examining the reasons for EECs’ limited success," ifh Working Papers 1 (2015), Volkswirtschaftliches Institut für Mittelstand und Handwerk an der Universität Göttingen (ifh).
    9. Anders Gustafsson, 2019. "Busy doing nothing: why politicians implement inefficient policies," Constitutional Political Economy, Springer, vol. 30(3), pages 282-299, September.
    10. Michael Waldman, 1990. "A Signalling Explanation for Seniority Based Promotions and Other Labor Market Puzzles," UCLA Economics Working Papers 599, UCLA Department of Economics.
    11. Rod Mccoll & Yann Truong & Antonella La Rocca, 2019. "Service guarantees as a base for positioning in B2B," Post-Print hal-02326105, HAL.
    12. Ivana Fellini & Raffaele Guetto & Emilio Reyneri, 2018. "Poor Returns to Origin-Country Education for Non-Western Immigrants in Italy: An Analysis of Occupational Status on Arrival and Mobility," Social Inclusion, Cogitatio Press, vol. 6(3), pages 34-47.
    13. repec:ebl:ecbull:v:10:y:2004:i:8:p:1-8 is not listed on IDEAS
    14. Kuhnen, Camelia M., 2010. "Searching for Jobs: Evidence from MBA Graduates," MPRA Paper 21975, University Library of Munich, Germany.
    15. Frost, Adam K. & Frost, Shuang L. & Johnsen, Christian Garmann, 2025. "Status entrepreneurship: The entrepreneurial pursuit of social distinction," Journal of Business Venturing Insights, Elsevier, vol. 24(C).
    16. Stuth, Stefan & Schorlemmer, Julia & Hennig, Marina & Allmendinger, Jutta, 2014. "Freiwilliges Engagement: Ein Patentrezept für Wiedereinsteigerinnen?," Discussion Papers, Presidential Department P 2014-007, WZB Berlin Social Science Center.
    17. Udo Kreickemeier & Jens Wrona, 2017. "Two-Way Migration between Similar Countries," The World Economy, Wiley Blackwell, vol. 40(1), pages 182-206, January.
    18. Nakabayashi, Masaki, 2011. "Schooling, employer learning, and internal labor market effect: Wage dynamics and human capital investment in the Japanese steel industry, 1930-1960s," MPRA Paper 30597, University Library of Munich, Germany.
    19. Xu, Chong & Tao, Miaomiao & Qi, Lingli & Roubaud, David, 2025. "Can green CEOs trigger the green premium effect?," Finance Research Letters, Elsevier, vol. 80(C).
    20. Michele Dell'Era & Luis Santos-Pinto, 2011. "Entrepreneurial Overconfidence, Self-Financing and Capital Market Efficiency," Cahiers de Recherches Economiques du Département d'économie 11.06, Université de Lausanne, Faculté des HEC, Département d’économie, revised Nov 2012.
    21. Maciel, Leandro S. & Kayo, Eduardo K., 2026. "When climate extremes shake equity markets: Evidence from multifractal analysis," Finance Research Letters, Elsevier, vol. 87(C).

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:finlet:v:89:y:2026:i:c:s154461232502519x. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/frl .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.