Green finance and firm’s ESG behaviors: Bridge the gap between the sustainability and responsibility for financial investment

This study explores the integration of green finance and ESG investing to promote sustainable finance and responsible investment practices. Green finance, aimed at supporting environmental protection and sustainable development, has made significant progress in China, with strengthened top-level design and improved green credit policy systems. However, challenges remain in the market’s decisive role in allocating green financial resources and the varying levels of ESG strategic planning and application among financial institutions. ESG investing, which integrates environmental, social, and governance factors into investment decisions, aligns financial returns with positive social and environmental impacts. The study proposes a framework that integrates green financial practices and ESG investing to bridge these gaps and promote sustainable finance. Hypotheses are developed to investigate the positive impact of green finance on corporate ESG performance, considering regional differences and the role of green financial instruments, external oversight, and corporate innovation. Data sources include green credit appraisal systems, ESG rating data, green patent filings, marketization index reports, and AI-related term frequencies in annual reports. The study aims to contribute to the literature on green finance and ESG investing, providing insights for policymakers and investors to enhance sustainable finance practices.