Can green finance promote green-biased technological progress?

Green innovation (GI) is a critical pathway to sustainable development. However, the growth of GI remains sluggish and falls short of meeting the pressing demands of environmental protection and carbon mitigation. While extant literature predominantly emphasizes GI quantity, this study uncovers the structural roots of GI stagnation through the aspect of biased technological progress. Using a comprehensive panel dataset of Chinese A-share listed firms from 2010 to 2021 and employing fixed-effects and instrumental variable regression models, we find that traditional finance (TF) tends to favor non-green innovation (NGI) due to its short-term profit orientation, thus widening the gap between GI and NGI. In contrast, green finance (GF) significantly promotes the green-biased technological progress (GBTP), particularly among private enterprises (PEs), by alleviating financing constraints and information asymmetries. Furthermore, the effectiveness of GF is moderated by different types of environmental regulation and information transparency: subsidy-based environmental regulation amplifies the positive effect of GF in PEs, while cost-based regulation plays a more critical role in state-owned enterprises (SOEs). Our findings contribute to the understanding of financial policy design for promoting sustainable technological transformation and offer actionable insights for optimizing green innovation pathways across different ownership structures.