How does green finance policy reduce the carbon emissions of polluting enterprises? A mediation effect analysis of inclusive finance

Carbon reduction is critical to address the issue of global climate challenges. However, the impact of green finance policy in curbing carbon emissions for polluting enterprises remains uncertain. This study employs a difference-in-differences (DID) approach to assess the impact of China’s Green Finance Reform and Innovation Policy (GFRI) on carbon emissions, using data from 849 polluting enterprises listed on the Shanghai and Shenzhen stock exchanges. Then, we conclude that: (1) The GFRI significantly reduces carbon emissions of polluting enterprises in the pilot areas of China. (2) The GFRI achieves carbon reduction by reallocating financial resources and enhancing environmental governance; meanwhile, inclusive finance enhances the carbon reduction effect of GFRI. (3) The carbon reduction effects of GFRI are more pronounced in private enterprises, those located in regions with higher levels of financial development and the areas with stricter environmental regulations. These results provide empirical evidence of green finance’s role in carbon reduction and highlight the need for deeper integration of inclusive finance mechanisms to optimize resource allocation and accelerate the transition toward a low-carbon economy.