Impact of green credit policy on sustainability performance of high-pollution enterprises.

Abstract

Green credit is a financial service that potentially mitigates the impact of environment problems such as climate change, one of the greatest challenges of our time. The effectiveness of a policy that promotes green credit, however, remains controversial. We use China's "Green Credit Guidelines" in 2012 as a quasi-natural experiment to identify the causal impact of green credit policy (GCP) on enterprise sustainability performance (ESP), which integrates the financial and environmental social responsibility performance of heavily polluting firms. Our PSM-DID analysis shows that GCP significantly improves ESP, especially among the small and private highly polluting firms and firms located in regions with a higher level of marketization. Furthermore, GCP leads to more green innovation which, together with government subsidies, plays a positive moderating role between GCP and ESP. Our results have important policy implications.