Can green finance policy promote green innovation in cities? Evidence from pilot zones for green finance reform and innovation in China.

As a green finance policy, the establishment of pilot zones for green finance reform and innovation (PZGFRI) is of crucial importance to green innovation. This study employs panel data at the city level from 2011 to 2019 to explore the impact of the PZGFRI policy on green innovation in cities by constructing the Difference-in-Differences model. The results indicate that the PZGFRI policy significantly improves overall green innovation in cities. We test the mechanisms at the city level and find that the PZGFRI policy achieves green innovation improvement by improving capital support and research and development input, and this effect could be weakened when pollution intensity in cities is high. There is heterogeneity in different regions, cities of different economic development levels, and environmental regulation strength in the green innovation improving effects. These results suggest that the government should continue to promote the development of green finance and increase regulatory efforts to realize the enhancement of green innovation. This study can not only provide the Chinese government with more focused suggestions on green finance development of macro-policies but also give important references for other developing countries on green finance development.