ABSTRACT Amid the transition towards a low‐carbon economy and the pursuit of sustainable development goals, ESG performance has become a key indicator of long‐term corporate sustainability. Drawing on data from Chinese A‐share listed companies between 2012 and 2022, this study examines how green innovation and green finance affect corporate ESG performance. We employed a two‐way fixed‐effects model and a dynamic panel GMM model to test the hypotheses. Our results show that green innovation improves ESG performance, particularly in the environmental dimension. Green finance enhances ESG outcomes by easing financing constraints, thereby boosting market confidence and supporting regulatory reforms. Notably, the interaction between green innovation and green finance is positive, indicating that they complement each other. By integrating regulatory conditions and firm capabilities within a single framework, the findings provide new insights into China's green transition to guide policy development and ESG‐focused investment.
Feng et al. (Tue,) studied this question.