Does green finance reduce environmental pollution?-a study based on China's provincial panel data

As a bridge between economy and ecology, green finance is vital in improving environmental quality and promoting sustainable development. Based on the building of an environmental pollution index system, this paper constructs the [Formula: see text] model to deeply explore the specific impact of green finance on environmental pollution using China's provincial panel data from 2007 to 2020. This paper constructs an intermediary model to test the impact mechanism of green finance on reducing environmental pollution and discusses the regional heterogeneity of green finance in reducing environmental pollution. The results show that (1) green finance can significantly reduce environmental pollution, among which green credit has a pronounced effect on reducing environmental pollution, green investment has a relatively small effect, and green securities have not significant effect. (2) Green finance has the best inhibitory effect on solid pollution, less inhibitory effect on air pollution, and no significant improvement effect on water pollution. (3) Green technology innovation, industrial structure upgrading, and environmental regulation play an intermediary role in the process of green finance reducing environmental pollution and improving environmental quality. (4) The effect of green finance in the eastern and carbon emission pilot areas is significantly better than in the central and western regions and non-carbon emission pilot areas respectively. According to the research results of this paper, suggestions are put forward to promote the development of green finance, which is of great significance to reducing environmental pollution and achieving sustainable development goals.