Green finance and green innovation: the Moderating role of ESG and synergies with inclusive finance

Green innovation is a key path to promoting and realizing long-term sustainable development. Whether and how China's green finance policy and inclusive finance policy affect firms' green innovation capacity is important for promoting sustainable development. Analysis of publicly traded firms' data (2013–2022), employing a moderated mediation model with a difference-in-differences design, reveals green finance elevates corporate green innovation. By increasing environmental protection subsidies, the green finance strategy effectively enhances businesses' potential for green innovation. ESG scores positively moderated green finance policy enhancing the green innovation of corporates and enhanced the accuracy of environmental subsidies. The synergistic effect of green finance policy and inclusive finance policy enhances green innovation in non-heavily polluting, state-owned, and non-state-owned firms, and there is a substitution effect between ESG and dual policies in non-heavily polluting and non-state-owned firms. Our study delves into green finance and inclusive finance policies and reveals how they can effectively contribute to the enhancement of firms' green innovation capabilities providing valuable empirical support and targeted policy recommendations for reaching the SDGs.