The impact of green finance on corporate environmental performance: the moderating role of economic policy uncertainty

IntroductionGreen finance has emerged as a critical mechanism for enhancing corporate environmental performance (CEP) and achieving global sustainability goals. However, the effectiveness of green finance may be influenced by macroeconomic conditions, particularly economic policy uncertainty (EPU), which can alter firms' investment behavior and long-term environmental strategies. This study investigates the impact of green finance on CEP and examines the moderating role of EPU across different economic contexts.MethodsThe study employs a balanced panel dataset of 23,454 firm-year observations from the United States, United Kingdom, China, and selected Asia-Pacific economies over the period 2014–2024. A multi-method econometric framework is applied, including Difference-in-Differences (DiD), fixed-effects models, instrumental variable two-stage least squares (IV-2SLS), propensity score matching (PSM-DiD), and system generalized method of moments (GMM), to ensure robust causal inference and address endogeneity concerns.ResultsThe findings reveal that green finance significantly improves corporate environmental performance. However, economic policy uncertainty weakens this positive relationship, indicating a negative moderating effect. Further analysis identifies nonlinear threshold effects, suggesting that the influence of EPU varies across different levels of uncertainty. The moderating effect is more pronounced in emerging markets, where institutional instability amplifies the adverse impact of policy uncertainty on green investment effectiveness.DiscussionThis study contributes to the literature by integrating macro-level policy uncertainty into firm-level sustainability analysis and highlighting the conditional effectiveness of green finance. The results underscore the importance of stable policy environments and strong institutional frameworks in maximizing the environmental benefits of green finance. Policymakers should focus on reducing uncertainty and strengthening regulatory consistency to enhance sustainable investment outcomes, particularly in emerging economies.