Green finance is increasingly recognized as an important instrument for improving sustainable development. Existing research has focused on green finance’s impact on corporate environmental performance, failing to account for the complex regional mechanisms that shape its contribution to systemic sustainability. This study fills the gaps by examining the mechanism and spatial heterogeneity of green finance’s influences on regional sustainability measured by environmental performance. Using panel data from 30 Chinese provinces during 2010–2022, it shows that green finance increased from 0.318 to 0.539, while environmental performance improved from 0.441 to 0.656. The empirical evidence demonstrates that green finance has a robust positive effect on environmental performance, acting as an effective tool for environmental governance. This impact is primarily channeled through technological innovation and green consumption, with environmental regulation providing a synergistic moderating role. Furthermore, significant regional heterogeneity in sustainability outcomes is observed, while the effect is strongest in eastern China, unstable or negligible in old industrial bases, and unexpectedly negative in ecologically fragile Northwest China. The disparities are attributed to variations in local economic structure, institutional capacity, and development stage. Corresponding policy recommendations include improving the institutional framework, channeling financial resources to green technology R&D and sustainable consumption incentives, integrating green finance with environmental policies, and implementing region-specific strategies. This study offers practical benchmarks for China and other developing economies to leverage green finance as a driver of sustainable development.
Jiang et al. (2026) studied this question.