Green Finance, ESG Performance, and Corporate Innovation

Using data on Chinese A-share listed companies from 2010 to 2021, we empirically examine the impact of green finance on corporate innovation and the mediating role of the firm’s Environmental, Social, and Governance (ESG) performance. The results show that green finance significantly promotes corporate innovation, and this effect is more pronounced in non-state-owned enterprises, non-high-polluting industries, and enterprises located in the eastern developed regions of China. ESG performance serves as a significant mediating variable between green finance and corporate innovation, revealing a major internal transmission mechanism through which green finance influences corporate innovation via ESG performance and providing key research insights and practical policy implications for viewing green finance as key to developing differentiated approaches to corporate innovation strategies.