IDEAS home Printed from https://ideas.repec.org/a/eee/riibaf/v77y2025ipas0275531925001709.html
   My bibliography  Save this article

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

Author

Listed:
  • Meng, Sun
  • Duan, Yunfei
  • Zhou, Wei

Abstract

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.

Suggested Citation

  • Meng, Sun & Duan, Yunfei & Zhou, Wei, 2025. "How does green finance policy reduce the carbon emissions of polluting enterprises? A mediation effect analysis of inclusive finance," Research in International Business and Finance, Elsevier, vol. 77(PA).
    • Handle: RePEc:eee:riibaf:v:77:y:2025:i:pa:s0275531925001709
    DOI: 10.1016/j.ribaf.2025.102914
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0275531925001709
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ribaf.2025.102914?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. Sun, Xialing & Meng, Zheng & Zhang, Xuchao & Wu, Jiaxi, 2025. "The role of institutional quality in the nexus between green financing and sustainable development," Research in International Business and Finance, Elsevier, vol. 73(PA).
    2. Zhang, Xing-Ping & Cheng, Xiao-Mei, 2009. "Energy consumption, carbon emissions, and economic growth in China," Ecological Economics, Elsevier, vol. 68(10), pages 2706-2712, August.
    3. Jacobson, Louis S & LaLonde, Robert J & Sullivan, Daniel G, 1993. "Earnings Losses of Displaced Workers," American Economic Review, American Economic Association, vol. 83(4), pages 685-709, September.
    4. Sun, Yunpeng & Guan, Weimin & Cao, Yuning & Bao, Qun, 2022. "Role of green finance policy in renewable energy deployment for carbon neutrality: Evidence from China," Renewable Energy, Elsevier, vol. 197(C), pages 643-653.
    5. Louis S. Jacobson & Robert J. LaLonde & Daniel G. Sullivan, 1993. "Long-term earnings losses of high-seniority displaced workers," Economic Perspectives, Federal Reserve Bank of Chicago, vol. 17(Nov), pages 2-20.
    6. Li, Xiaosheng & Wang, Ruirui & Shen, Z.Y. & Song, Malin, 2023. "Green credit and corporate energy efficiency: Enterprise pollution transfer or green transformation," Energy, Elsevier, vol. 285(C).
    7. Yang, Qin & Du, Qiang & Razzaq, Asif & Shang, Yunfeng, 2022. "How volatility in green financing, clean energy, and green economic practices derive sustainable performance through ESG indicators? A sectoral study of G7 countries," Resources Policy, Elsevier, vol. 75(C).
    8. Niu, Niu & Ma, Junhua & Zheng, Deyuan & Lu, Yang & Zhang, Bin, 2025. "Extreme weather and the green transition of energy firms: The moderating effect of digital technology and digital inclusive finance," Research in International Business and Finance, Elsevier, vol. 76(C).
    9. Cui, Xiaona & Mohd Said, Ridzwana & Abdul Rahim, Norhuda & Ni, Mengjiao, 2024. "Can green finance Lead to green investment? Evidence from heavily polluting industries," International Review of Financial Analysis, Elsevier, vol. 95(PB).
    10. Lee, Chien-Chiang & Wang, Fuhao, 2022. "How does digital inclusive finance affect carbon intensity?," Economic Analysis and Policy, Elsevier, vol. 75(C), pages 174-190.
    11. Cheng, Qiongwen & Zhao, Xiaoge & Zhong, Shihu & Xing, Yudan, 2024. "Digital financial inclusion, resident consumption, and urban carbon emissions in China: A transaction cost perspective," Economic Analysis and Policy, Elsevier, vol. 81(C), pages 1336-1352.
    12. Danish & Recep Ulucak & Salah Ud‐Din Khan & Muhammad Awais Baloch & Nan Li, 2020. "Mitigation pathways toward sustainable development: Is there any trade‐off between environmental regulation and carbon emissions reduction?," Sustainable Development, John Wiley & Sons, Ltd., vol. 28(4), pages 813-822, July.
    13. Liu, Yunqiang & Liu, Sha & Shao, Xiaoyu & He, Yanqiu, 2022. "Policy spillover effect and action mechanism for environmental rights trading on green innovation: Evidence from China's carbon emissions trading policy," Renewable and Sustainable Energy Reviews, Elsevier, vol. 153(C).
    14. Chishti, Muhammad Zubair & Sinha, Avik, 2022. "Do the shocks in technological and financial innovation influence the environmental quality? Evidence from BRICS economies," Technology in Society, Elsevier, vol. 68(C).
    15. Zhao, Liange & Wang, Dongmei & Wang, Xueyuan & Zhang, Zhijian, 2023. "Impact of green finance on total factor productivity of heavily polluting enterprises: Evidence from green finance reform and innovation pilot zone," Economic Analysis and Policy, Elsevier, vol. 79(C), pages 765-785.
    16. Huang, Zhen & Gao, Ning & Jia, Ming, 2023. "Green credit and its obstacles: Evidence from China's green credit guidelines," Journal of Corporate Finance, Elsevier, vol. 82(C).
    17. Xing, Chao & Zhang, Yuming & Tripe, David, 2021. "Green credit policy and corporate access to bank loans in China: The role of environmental disclosure and green innovation," International Review of Financial Analysis, Elsevier, vol. 77(C).
    18. Murshed, Muntasir & Ahmed, Rizwan & Khudoykulov, Khurshid & Kumpamool, Chamaiporn & Alrwashdeh, Nusiebeh Nahar Falah & Mahmood, Haider, 2023. "Can enhancing financial inclusivity lower climate risks by inhibiting carbon emissions? Contextual evidence from emerging economies," Research in International Business and Finance, Elsevier, vol. 65(C).
    19. Lan, Jing & Wei, Yiming & Guo, Jie & Li, Qiuming & Liu, Zhen, 2023. "The effect of green finance on industrial pollution emissions: Evidence from China," Resources Policy, Elsevier, vol. 80(C).
    20. Chen, Jin & Meng, Wenfei & Dong, Yang & Zhou, Wei, 2025. "Geographic matching analysis between green finance development and carbon emissions in China’s new era of environmental transition," Research in International Business and Finance, Elsevier, vol. 73(PA).
    21. Chishti, Muhammad Zubair & Salam, Muhammad & Xaisongkham, Sorphasith & Du, Anna Min, 2025. "Influence of green ICT and socioeconomic factors on sustainable development: Evidence from Chinese provinces," Research in International Business and Finance, Elsevier, vol. 73(PA).
    22. Larelle Chapple & Peter M. Clarkson & Daniel L. Gold, 2013. "The Cost of Carbon: Capital Market Effects of the Proposed Emission Trading Scheme ( ETS )," Abacus, Accounting Foundation, University of Sydney, vol. 49(1), pages 1-33, March.
    23. Kais, Saidi & Sami, Hammami, 2016. "An econometric study of the impact of economic growth and energy use on carbon emissions: Panel data evidence from fifty eight countries," Renewable and Sustainable Energy Reviews, Elsevier, vol. 59(C), pages 1101-1110.
    24. Li Chang & Wenjing Li & Xiaoyan Lu, 2015. "Government Engagement, Environmental Policy, and Environmental Performance: Evidence from the Most Polluting Chinese Listed Firms," Business Strategy and the Environment, Wiley Blackwell, vol. 24(1), pages 1-19, January.
    25. Hong, Xianna & Chen, Qiuhua & Wang, Nan, 2024. "The impact of digital inclusive finance on the agricultural factor mismatch of agriculture-related enterprises," Finance Research Letters, Elsevier, vol. 59(C).
    26. Lv, Chengchao & Bian, Baocheng & Lee, Chien-Chiang & He, Zhiwen, 2021. "Regional gap and the trend of green finance development in China," Energy Economics, Elsevier, vol. 102(C).
    27. Anu, & Singh, Amit Kumar & Raza, Syed Ali & Nakonieczny, Joanna & Shahzad, Umer, 2023. "Role of financial inclusion, green innovation, and energy efficiency for environmental performance? Evidence from developed and emerging economies in the lens of sustainable development," Structural Change and Economic Dynamics, Elsevier, vol. 64(C), pages 213-224.
    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. Yi Chen & Zhongwen Xu & Xuehao Wang & Yining Yang, 2023. "How does green credit policy improve corporate social responsibility in China? An analysis based on carbon‐intensive listed firms," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 30(2), pages 889-904, March.
    2. Xiaoling Wang & Yiting Han & Baofeng Shi & Mohammad Zoynul Abedin, 2025. "The impacts of green credit guidelines on total factor productivity of heavy-polluting enterprises: A quasi-natural experiment from China," Annals of Operations Research, Springer, vol. 347(1), pages 41-68, April.
    3. Zhiliang Xu & Changxin Xu & Yun Li, 2023. "Green Credit Policy, Environmental Investment, and Green Innovation: Quasi-Natural Experimental Evidence from China," Sustainability, MDPI, vol. 15(10), pages 1-17, May.
    4. Huang, Xiaodi & Chen, Xiaoxiong & Liang, Zuming & Wu, Hongjie & Kang, Siyang, 2025. "Fair competition and investment behavior of foreign-invested firms—Evidence from a quasi-natural experiment in China," Economic Analysis and Policy, Elsevier, vol. 85(C), pages 2234-2246.
    5. Xue, Yan & Hu, Dongmei & Irfan, Muhammad & Wu, Haitao & Hao, Yu, 2023. "Natural resources policy making through finance? The role of green finance on energy resources poverty," Resources Policy, Elsevier, vol. 85(PA).
    6. Shihao Yin & Zhongguo Lin & Panni Li & Binbin Peng, 2025. "Does environmental credit affect bank loans? Evidence from Chinese A‐share listed firms," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 30(2), pages 1225-1248, April.
    7. Gao, Weilong, 2025. "Green finance reform under climate policy uncertainty: Implications for energy transition and security," Energy Policy, Elsevier, vol. 202(C).
    8. Guo, Bingnan & Feng, Weizhe & Lin, Ji, 2024. "The impact of green finance on labor income share: Evidence from green finance reform and innovation pilot zone," Economic Analysis and Policy, Elsevier, vol. 84(C), pages 1347-1358.
    9. Mo Du & Ruirui Zhang & Shanglei Chai & Qiang Li & Ruixuan Sun & Wenjun Chu, 2022. "Can Green Finance Policies Stimulate Technological Innovation and Financial Performance? Evidence from Chinese Listed Green Enterprises," Sustainability, MDPI, vol. 14(15), pages 1-28, July.
    10. Huang, Hongyun & Mbanyele, William & Wang, Fengrong & Song, Malin & Wang, Yuzhang, 2022. "Climbing the quality ladder of green innovation: Does green finance matter?," Technological Forecasting and Social Change, Elsevier, vol. 184(C).
    11. Xiuli Liu & Jing Cui & Yanrui Wu & Xiaohang Yue & Jun Shen & Pibin Guo, 2024. "The Nexus between Green Finance and Carbon Emissions: Evidence from Maturity Mismatch in China," Sustainability, MDPI, vol. 16(10), pages 1-24, May.
    12. Cui, Xiaona & Mohd Said, Ridzwana & Abdul Rahim, Norhuda & Ni, Mengjiao, 2024. "Can green finance Lead to green investment? Evidence from heavily polluting industries," International Review of Financial Analysis, Elsevier, vol. 95(PB).
    13. Yan, Zihan & Liao, Lewei, 2025. "Entrepreneurial miracles in the low-carbon transition: Causal inference from China's low carbon city pilot," Economic Analysis and Policy, Elsevier, vol. 85(C), pages 1374-1390.
    14. Bas Scheer & Wiljan van den Berge & Maarten Goos & Alan Manning & Anna Salomons, 2022. "Alternative Work Arrangements and Worker Outcomes: Evidence from Payrolling," CPB Discussion Paper 435, CPB Netherlands Bureau for Economic Policy Analysis.
    15. Yuegang Song & Songlin Jin & Zhenhui Li, 2022. "Venture Capital and Chinese Firms’ Technological Innovation Capability: Effective Evaluation and Mechanism Verification," Sustainability, MDPI, vol. 14(16), pages 1-20, August.
    16. Andreas Pollak, 2008. "Optimal Unemployment Insurance with Variable Skill Levels," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 164(4), pages 696-726, December.
    17. Laiqun Jin & Xiuyan Liu & Sam Hak Kan Tang, 2021. "High-Technology Zones, Misallocation of Resources among Cities and Aggregate Productivity: Evidence from China," Economics Discussion / Working Papers 21-11, The University of Western Australia, Department of Economics.
    18. Gabrielle Wills, 2016. "Principal leadership changes in South Africa: Investigating their consequences for school performance," Working Papers 01/2016, Stellenbosch University, Department of Economics.
    19. Lídia Farré & Francesco Fasani & Hannes Mueller, 2018. "Feeling useless: the effect of unemployment on mental health in the Great Recession," IZA Journal of Labor Economics, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 7(1), pages 1-34, December.
    20. Jose Garcia‐Louzao & Marta Silva, 2024. "Coworker networks and the labor market outcomes of displaced workers: Evidence from Portugal," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 63(3), pages 389-413, July.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    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:riibaf:v:77:y:2025:i:pa:s0275531925001709. 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/ribaf .

    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.