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Abstract Improving the incentive mechanism and institutional framework of green finance policy is important to promote the synchronization of environmental management and enterprise development. Based on China's green finance reform and innovation pilot (GFRIP) policy in 2017, this study constructs a quasi‐natural experiment with a sample of A‐share listed companies and draws the following conclusions. (1) The effectiveness of GFRIP policy in significantly promoting enterprises' ESG performance in pilot areas, robustness tests such as propensity score matching and placebo tests reconfirm conclusions. (2) The GFRIP policy can effectively improve enterprise ESG performance by easing financing constraints, promoting green investment, and improving managers' green cognition. (3) Both external environmental law enforcement and internal manager environmental awareness can enhance the promotion effect of the GFRIP policy on ESG performance. (4) Heterogeneity analysis shows that the ESG performance of state‐owned enterprises, large enterprises, and high‐polluting enterprises is more affected by pilot policy. The results of the study provide a valuable perspective on how the government can promote green finance policies and implications for enterprises' sustainable development.
Gao et al. (Tue,) studied this question.