Measuring the Development Level and Influencing Factors of Green Finance under the Context of a Low-Carbon Economy

Heyu Qi; Guoqing Zhai

doi:10.53941/esrs.2026.100020

Highlights

A provincial GF development index is constructed using the entropy method based on green credit, green bonds, and green investment indicators.
Environmental regulation is identified as the most significant and robust driver of GF development.
Environmental regulation and market forces jointly drive GF development in eastern China.
Economic development and R&D investment are key determinants in central China, while environmental regulation dominates in western China.
Policy recommendations are proposed to strengthen environmental governance, optimize industrial transformation, improve regional coordination, and enhance green financial market mechanisms.

Abstract

Green finance (GF) is increasingly recognized as a critical instrument for facilitating the low-carbon economic transition. This study utilizes panel data of 30 Chinese provinces from 2015 to 2024, comprising 300 observations. First, an index system for assessing the level of green finance (GF) development is established using the entropy-weighting method. Subsequently, fixed-effects model is applied to examine the direct effects of per capita GDP, industrial structure upgrading, and the intensity of environmental regulation on GF development. To assess the robustness of the findings, a series of robustness checks are conducted. In addition, regional heterogeneity is examined by comparing the effects across eastern, central, and western China. The findings indicate that environmental regulation intensity exerts a substantial and robust positive effect on GF development; the negative impact of industrial structure upgrading aligns with expectations but fails to reach statistical significance; and the effects of openness to foreign trade and the share of fiscal expenditure on environmental protection are not significant. Regional differences present a more complex picture. In the eastern region, GF development is jointly driven by environmental regulation and market forces. In the central region, economic development and R&D investment play a more important role, while environmental regulation remains the dominant driving force in the western region. The study, therefore, after the analysis, suggests policy measures including promoting substantive industrial upgrading, strengthening environmental regulatory frameworks, enhancing interregional cooperation, and improving green financial market mechanisms. The findings provide empirical evidence for advancing high-quality GF development. They also contribute to achieving low-carbon economic goals.

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