Energy Reports 11 (2024) 914–924

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Energy Reports
journal homepage: www.elsevier.com/locate/egyr

Research Paper

How does green finance influence industrial green total factor productivity?
Empirical research from China
Hu Yue a, b, Zizhuo Zhou a, *, Hanwen Liu a
a
School of Economics, Guangdong University of Technology, Guangzhou, Guangdong 510520, China
b
Key Laboratory of Digital Economy and Data Governance, Guangdong University of Technology, Guangzhou, Guangdong 510520, China

A R T I C L E I N F O A B S T R A C T

Keywords: Industry is the pillar of the real economy, and its green development contributes to achieving the green and low-
Green finance carbon development goals proposed by the United Nations. This paper constructs an analytical framework of
Industrial green total factor productivity "green finance-green technological innovation-industrial green total factor productivity" to study how green
Green technological innovation
finance (GF) influences industrial green total factor productivity (IGTFP). Based on the panel data from 30
Sustainable finance
provinces and 281 cities in China between 2011–2019，this study measures the GF levels and the IGTFP index by
Industrial green development
using the entropy method and super-efficiency slacks-based model with Malmquist-Luenberger index method, to
conduct a series of empirical tests. Also, we focus on the mechanism effect of green technology innovation (GTI)
in the process of GF affecting IGTFP. Additionally, we have discussed the supporting role of digital financial
inclusion (DFI) in green finance development at the micro level. The main findings include: (1) The development
of green finance (GF) can significantly improve IGTFP, and it’s still credible after a series of robustness tests. (2)
The heterogeneity analysis indicates that the influence of GF on the IGTFP varies from different cities, and this
positive effect tends to increase with the expansion of city size. (3) Mechanism tests show that green techno­
logical innovation (GTI) has a positive mechanism effect in the process of GF influencing IGTFP. (4) The dis­
cussion indicates that digital financial inclusion can support green finance development, so as to promote
industrial green development in China. This study has momentous theoretical value and policy implications for
China and other developing countries in exploring green finance and industrial green development.

1. Introduction productivity is an important way to realize the development of a green

economy. Therefore, the IGTFP is a critical problem to be studied in the
Industry is the basis for developing of a country’s real economy, the new phase of economic growth, attracting broad attention from poli­
main driver of economic growth and an irreplaceable component of cymakers and scholars (Wang and Wang, 2023).
national economy (Awan et al., 2021). However, traditional industrial As the largest developing country with a high economic growth rate,
resource consumption, high pollution, and the low efficient develop­ China has achieved outstanding results in the industrial sector with
ment cause significant harm to the environment (Chiu and Lee, 2020; E. massive energy consumption since its reform and opening up (Yu,
Z. Wang et al., 2022). Resource depletion and ecological crises have 2022). However, severe carbon emissions and other environmental
become major global challenges, and have led to an international problems have occurred simultaneously with rapid economic growth
consensus regarding how to respond to global climate change and ach­ (Liu and Wu, 2013). China is currently the world’s largest carbon
ieve economic growth. To maintain economic growth while reducing emitter. According to the Ministry of Ecology and Environment of China
energy consumption and protecting the environment, many countries (2020), 70% of the country’s pollution originates from the industrial
have begun to focus on managing environmental issues and developing sector. With increasingly significant environmental risks and interna­
green economies (Wang and Lee, 2022). Industrial green total factor tional competition, the government has recognized that industrial green
productivity (IGTFP) is important for assessing how a country ensures development is inevitable for China (Zhu et al., 2019). In 2020, the
coordination between industrial development and environmental pro­ Chinese government announced that carbon neutrality could be ach­
tection (Chen et al., 2016). Improving industrial green total factor ieved by 2060. Policies like the “Industrial Green Development Plan

* Corresponding author.
E-mail address: [email protected] (Z. Zhou).

https://doi.org/10.1016/j.egyr.2023.12.056
Received 2 March 2023; Received in revised form 30 November 2023; Accepted 23 December 2023
Available online 29 December 2023
2352-4847/© 2023 The Authors. Published by Elsevier Ltd. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-
nc-nd/4.0/).
H. Yue et al. Energy Reports 11 (2024) 914–924

(2021–2025)” have promoted green economic growth. But China still does green finance work for industrial green development? Specifically,
faces severe environmental challenges now and is achieving economic how does green finance influence industrial green total factor produc­
transformation by promoting green industrial development and trans­ tivity? What’s the specific mechanisms, and what effects do they pro­
formation. Therefore, improving the IGTFP is a crucial research question duce? What are the new developments of green finance in this digital
with practical significance. age? These core issues above will have important implications for
Finance is the bloodline of economy and is a major force in China’s exploring green finance and industrial green development. We construct
industrial development. The concept of green finance was first proposed a theoretical analysis framework for the influence of green finance on
by the World Commission on Environment and Development in 1988 IGTFP, and use relative data of 30 provinces and 281 cities from China to
and has since been the subject of extensive research (Salazar, 1998). study these core issues. The possible marginal contributions of this study
Although the meaning of green finance has not been standardized, as a are as follows. (1) Compared to the previous studies on the green total
new form of finance on green development, there is a consensus on the factor productivity, this study includes green finance (GF) in the IGTFP
necessity for its development (Zhou et al., 2020; Halkos and Managi, Lee research system. We innovatively demonstrate the influence of GF on
et al., 2023, 2023). We use China’s official definition of green finance – IGTFP, especially focusing on the mechanism of green technological
an economic activity that supports environmental improvement, climate innovation (GTI) in it, revealing the relationship between "Green
change, and the efficient use of resources, that is, the financial services Finance - Green Technological Innovation - Industrial Green Total Factor
provided for project financing, project operation, and risk management Productivity". (2) This study examines the influence of GF on IGTFP by
in the fields of environmental protection, energy conservation, clean constructing green finance index system and using super-efficiency
energy, green transportation, and green buildings. SBM-ML (Slacks-based model Malmquist-Luenberger) method com­
In environmental economics research, the existing literature shows bined with theoretical analysis. It also explores whether digital financial
that green finance has become critical for promoting industrial green inclusion (DFI) can compensate for the lack of micro-support in devel­
development from different perspectives. Lan et al. (2023) analyzed oping GF. We study the coordination effect of green finance and digital
from the perspective of industrial pollution emissions, and found that financial inclusion and its influence on the IGTFP by constructing a
green finance can reduce industrial pollution emissions within a certain coupling coordination model. The results provide theoretical support
range. Gu et al. (2021) analyzed from the perspective of industrial and an empirical basis for exploring green finance and industrial green
transformation, and proposed that green finance could promote indus­ development in China, and also provide experience for other developing
trial transformation and upgrading in overall efficiency. Although there countries to promote green economic development through green
are few studies on the influence of green finance on industry from the finance.
perspective of IGTFP, green finance is indispensable for improving The remainder of this paper is organized as follows. Section 2 out­
productivity. Lee et al. (2022) studied of macro green productivity and lines the relevant literature and theoretical analysis on green finance,
found that green finance and its related development policies can green technological innovation and the IGTFP. Section 3 introduces the
significantly improve the level of green productivity. Zhao et al. (2023) models and related variables used in this study. Section 4 presents the
studied the impact of green finance reform policy and found that green empirical results. Finally, Section 5 presents conclusions and policy
finance reduced the total factor productivity of heavily polluting en­ implications.
terprises through financing constraints and environmental investment.
Financial institutions can provide direct capital support for green 2. Literature review and theoretical analysis
industries and projects, encouraging the reallocation of financial re­
sources from highly polluting and energy-consuming industries to 2.1. Green finance and industrial green total factor productivity
environmentally-friendly ones (Xu and Li, 2020; Hu et al., 2021). En­
terprises can undertake technological innovation and upgrade actions Many studies have explored topics related to green finance. Early
after receiving green financing, improving production efficiency and theoretical research on green finance mainly focused on the role of
reducing pollution outputs (He et al., 2019a; He et al., 2019b). From a financial institutions in environmental protection and sustainable eco­
social perspective, enterprises obtaining green financial services must nomic development (White, 1996; Jeucken and Bouma, 1999). Re­
fulfill their corresponding social and environmental protection re­ searchers have focused on quantitative analysis in three ways. First,
sponsibilities. Regulatory authorities strictly supervise their production research on the effects of green finance business on financial enterprises
and operational behavior to ensure green funds are used for green (Scholtens and Dam, 2007); second, the impact of green finance-related
projects. Green finance can improve green total factor productivity policies on the green development of the economy (Wang and Wang,
through these mechanisms. 2021); and third, the economic and environmental effects of green
Green finance is deeply embedded in green growth at the new stage financial products (Scholtens, 2017; Flammer, 2021). These studies laid
of economic development (Zhou et al., 2020). This is a breakthrough for the foundation for the present study. Among the factors influencing
the Chinese industrial sector in realizing green and low-carbon trans­ IGTFP, the existing literature conducts a relatively rich exploration from
formations. However, green finance also faces weak micro-foundations, the perspective of environmental regulation, trade openness, and the
such as adverse selection and moral risks. Financial institutions’ pursuit digital economy (Cheng and Kong, 2022; R. Ding et al., 2022; L. Ding
of environmental sustainability means they are likely to encounter the et al., 2022; Hao et al., 2023). However, few studies have been directly
risk of uncertainty, which contributes to the paradox of "business profit related to green finance and the IGTFP. The studies most closely related
and environmental sustainability" (Illankoon et al., 2017). Fortunately, to this issue focus on the relationship between green finance and green
digital financial inclusion can resolve the paradox between green total factor productivity (GTFP). Lee and Lee (2022) employed panel
financing and enterprise development. This can enhance the financial data from 30 Chinese provinces and found that green finance develop­
participation of market entities and the transparency of financial regu­ ment significantly improves the level of green productivity. Liu et al.
lations through digitalization and inclusiveness. In 2021, the Chinese (2021) explored the mechanisms and constraints of green finance on
Government Work Report indicated that "green finance" and the "digital economic growth. Their research shows that green finance plays a
economy" are new directions for future development. A new "greening" prominent direct role in promoting GTFP.
and " digitizing" trend will foster economic growth. Now that the digital Regarding the theoretical mechanism of GF influencing IGTFP, this
age has fully arrived, scholars are trying to reveal whether digital in­ study proposes that green finance can promote sustainable economic
clusion can compensate for the problems of green finance at the micro growth by supporting environmental improvements and resource con­
level to improve the IGTFP. servation. The mechanism of this process can be described in terms of
Based on this, the research aims of this study are as follows. How environmental regulations, resource allocation optimization, and green

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consumption. enterprises can improve their resource utilization efficiency through

(1) Environmental regulation effect. Environmental regulations recycling technology and other GTI. Resource savings caused by the GTI
significantly influence green technological innovation and industrial can reduce the unit factor input in industrial enterprise production.
structure upgrades (Du et al., 2021). Green finance is an extension of Meanwhile, a higher resource utilization rate can reduce energy con­
traditional ecological regulations and a new type of environmental sumption and result in a higher product output per unit factor input. In
governance. A market-based economic incentive mechanism comple­ addition, the government provides policy support for industrial enter­
ments traditional government environmental regulation policies. It prises that adopt the GTI. The corresponding preferential and subsidy
stimulates technological innovation, reduces environmental pollution in policies can reduce the marginal costs of technological innovation and
local industries, and incentivizes enterprises to improve their efficiency. business operations.
Green finance tracks the fund flows of industrial enterprises when (2) The effect of reducing polluting emissions. Reducing the
providing green credit services, which helps disclose green development environmental impact of pollutants is essential for green industrial
information to the public. It can also reduce the waste of financial re­ development (Cheng et al., 2018). GTI can reduce industrial pollution
sources and financing opportunities for polluters (Mrkajic et al., 2019). through process improvements and end-of-pipe treatments. GTI, such as
Therefore, IGTFP can be promoted in these ways. clean processes and pollution control, can promote green production by
(2) Resource allocation optimization effect. Green projects have reducing waste generation during the initial stages. The pollutants
high initial investments and long return cycles, meaning that obtaining generated in the actual process can be reused in production, reducing
adequate financial support is crucial for green industrial development. pollution emissions from the source. Additionally, end-of-pipe treatment
Green finance can optimize the allocation of funds between heavily can separate and dispose of industrial wastes, such as wastewater and
polluting and green industries by raising the financing threshold for the slag, reducing waste emission pollution and promoting IGTFP.
former, as these funds are guided to energy-saving and environmentally (3) Performance enhancement effect. Economic performance is
friendly industries and projects (Wang and Zhi, 2016). Enterprises that the primary GTI output for industrial enterprises. Performance
can barely complete their green transformation will eventually be enhancement can compensate for industrial enterprise innovation inputs
eliminated from the market. Green finance attracts more market entities and help promote the IGTFP (Wang, 2022). The GTI can optimize the
to participate in building green financial systems (Ren et al., 2020). This efficiency of allocating and utilizing factors of production and revolu­
can contribute to the reallocation of resources, such as technology and tionize production and operation procedures. Generally, this cultivates a
labor, within and among industries to support the growth of IGTFP. good reputation among enterprises and enhances their market share and
(3) Green consumption effects. In addition to its supply-side ef­ value. The resulting green technology patents can bring sustainable
fects, green finance can guide residents in forming green consumption competitive advantages and patents to enterprises, enhancing their
concepts and promote industrial green transformation on the demand green competitiveness in the market, thus significantly improving the
side (Ponce et al., 2021). Green consumption is an important driving economic performance of industrial enterprises and promoting the
force in promoting IGTFP. According to the Environmental Kuznets IGTFP.
Curve, green consumption concept encourages the greening of the
consumption structure. Green industrial products can replace traditional 2.3. Green finance and green technological innovation
ones, forcing enterprises to innovate green products to meet consumer
preferences (Fan et al., 2019). Green finance also cultivates green con­ Scholars have mainly studied environmental regulation, GTI, and
sumption by regulating credit interest rates and income expectations IGTFP under a unified framework based on Porter’s hypothesis (Du
through green financial products. et al., 2021; Lee et al., 2022; Cheng and Kong, 2022), but research on the
relationship between green finance and green technological innovation
2.2. Green technological innovation and industrial green total factor is still relatively limited. We refer to the research of Wang et al. (2021) to
productivity conduct the theoretical analysis of GF on GTI. From the perspective of
the incentive and constraint effects and agency cost reduction, we pro­
Innovation is a fundamental driving force for improving factor pro­ pose that green finance (GF) has a positive influence on green techno­
ductivity (He et al., 2019b). Green technological innovation (GTI) refers logical innovation (GTI) in developing countries and countries with low
to the technological innovation of enterprises in production or service levels of green finance. First, the incentive constraint effect implies that
processes with environmentally friendly features. Existing research has green finance provides low-cost external financing to low-risk industrial
discussed the GTI and total factor productivity. Wang et al. (2021) enterprises and raises the financing threshold for heavily polluting en­
concluded that green finance is a critical way to improve GTFP from a terprises. This motivates enterprises to actively carry out GTI and
regional perspective. Han et al. (2023) studied the influencing factors of restrain high energy-consuming and polluting production behaviors.
green technology innovation from the perspective of carbon emissions Green finance can stimulate industrial GTI by providing enterprises with
trading system. Lee et al. (2022) explored the relationship between inexpensive and stable financial support (Irfan et al., 2022). Second,
innovation and productivity. The results indicate that innovation green finance’s environmental regulatory features enhance external
capability can effectively promote GTFP in China. Xie et al. (2020) used supervision of enterprises and reduce managers’ agency costs. Under
the Generalized Method of Moments estimation method to study the increasingly strict environmental regulations, green finance forces
impact of technological innovation on industrial green transformation, managers to actively seek green innovation investments and green
and propose that technological innovation can significantly facilitate the technology development opportunities, thereby promoting enterprises’
green industrial transformation of cities. In general, the existing GTI.
research supports the view that green technological innovation helps
promote IGTFP. Therefore, when studying the influence of Green 2.4. The coordination effect of green finance and digital financial
Finance on IGTFP, we cannot ignore the role of green technological inclusion
innovation in this process. Therefore, when studying the impact of
Green Finance on industrial green total factor productivity, we cannot Green finance is critical financial support for GTI and IGTFP, and it is
ignore the role of green technological innovation. also an essential kinetic energy that drives economic green trans­
Based on these studies, we theoretically propose that GTI promotes formation. However, it also faces problems in real economics, such as far
IGTFP growth through the following mechanisms. less supply than demand and asymmetric information. Digital financial
(1) Cost-saving effect. This is manifested mainly in resource savings inclusion (DFI) can enhance the financial participation of market entities
and governmental green subsidies (Cao et al., 2021). Industrial and the transparency of financial supervision with its "digitalization"

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and "inclusiveness", which is an effective way to solve the paradox of

IGTFPit = α1 + β1 GF it + λControlnit + μi + δt + εit (1)
green finance development. Given the internal consistency and trend of
integration between green finance and digital financial inclusion (DFI), Here, IGTFPit indicates the city’s IGTFP index, GFit indicates the
some studies have begun to explore the interaction between green level of green finance, Controlnit indicates a series of control variables, i
finance and DFI from a theoretical perspective (L. Wang et al., 2022; E.Z. identifies the unit that involves 281 cities in China, t denotes the time
Wang et al., 2022; Tian et al., 2022). This study uses the GDFI to period from 2011 to 2019, μi denotes the individual fixed effects, δt
represent the coordination effect of green finance and DFI. However, few denotes the year fixed effects, and εit is the error term.
researches have examined GDFI and its influence on IGTFP, which is The academic consensus is that the GTI can affect IGTFP (Yuan et al.,
discussed in this study. Based on the following theoretical analysis, we 2020; Du et al., 2021; Du et al., 2019). To explore whether green finance
argue that DFI can compensate for the lack of micro-level support for can influence green technological innovation and thus improve IGTFP,
green finance: this study draws on the classical economics model as follows to test the
"Digital" technology facilitates access to ecological and environ­ mechanism:
mental information disclosure, enhances financial institutions’ "green"
GTI it = α2 + β2 GF it + λControlnit + μi + δt + εit (2)
identification ability, and alleviates problems caused by ecological in­
formation asymmetry. The GDFI can enhance the utilization rate of Here, GTIit denotes green technological innovation, measured by the
environmental information by collecting and processing production, number of green invention patents obtained by cities, and Controlnit , εit ,
transactions, and behavior data. Big data-based analyses can enhance δt and μi denote the same meaning as in the baseline regression model.
financial institutions’ ability to identify green projects and environ­
mental risks. They established a green rating model and database using
3.2. Coupling coordination model
comprehensive environmental data descriptions of industrial enter­
prises, which provided practical solutions to adverse selection problems.
The coupling-coordination model can quantitatively evaluate the
Financial institutions can also use digital technology to track the use of
coordinated development state of each subsystem under interaction.
various resources and dynamically grasp the use of green funds and the
This finding is consistent with the interaction between green finance and
pollution status of enterprises throughout operations to alleviate the
digital financial inclusion discussed in the present study. Therefore,
moral risk problem faced by green finance and improve industrial green
referring to Yin and Xu, (2022) and R. Ding et al. (2022); L. Ding et al.
development.
(2022), this study uses a coupling model to calculate the degree of co­
Meanwhile, "inclusiveness" lowers the threshold of access to green
ordination between green finance (GF) and digital financial inclusion
financial services and promotes the participation of market entities in
(DFI) to characterize their integration. It is assumed that there are two
green finance so that green finance and digital financial inclusion sys­
systems, denoted as Sx and Sy , where Cxy represents the degree of
tems complement each other and develop synergistically. Although
coupling between the systems. The coupling-degree model is expressed
China’s green financial system is booming, the participation of the
as follows:
public and small enterprises is still insufficient. The GDFI provides an
[ ]1/2
interactive platform that matches the supply and demand for green Sx Sy
financial services. This broadened the financing channels and bound­ Cxy = 2 × (3)
(Sx + Sy )2
aries of green finance. Financial institutions can obtain high-quality
capital from social entities and use it in economic operations, thereby However, the degree of coupling only reflects the coupling rela­
increasing the supply of green funds for industrial green projects and tionship between Sx and Sy and does not reflect the degree of coordi­
enterprises. This will help expand the breadth of green finance, improve nation development between systems. There may be situations in which
the quality of DFI development, and promote the IGTFP more a high degree of coupling and a low level of development occur simul­
effectively. taneously. This shows that the integration of GF and DFI is staggering,
dynamic, and in non-equilibrium. To further reflect the coordination
2.5. Literature gap degree of GF and DFI, the following coupling coordination model was
constructed based on Eq. (3):
The above literature review shows that, although existing studies
have achieved considerable results, there are still some gaps. (1) The T xy = αSx + βSy Dxy = (Cxy × T xy )1/2 (4)
existing studies have paid less attention to the industry department that
closely related to green development. The influence of GF on IGTFP where T xy denotes the composite evaluation index of GF and DFI system
requires further exploration. A few studies have discussed the relation­ and α and β correspond to the importance of the two systems to the
ship between GF and regional total factor productivity. Green techno­ coupled coordination system, respectively, with α + β = 1. This paper
logical innovation (GTI) is an important way to promote IGTFP. argues that GF and DFI are equally important theoretically. Hence, α =
However, few studies have included it in the analytical framework of GF β = 1/2, and Dxy is the coupling coordination degree of GF and DFI
on IGTFP. (2) "Greening" and " Digitizing" are essential trends in the system. This study uses GDFI to represent the coordination effect of
current economic development. Digital financial inclusion can effec­ green finance (GF) and digital financial inclusion (DFI). And we are
tively compensate for lack of micro-level support for green finance trying to discuss whether digital inclusion can compensate for the
development. However, few empirical studies in the financial field focus problems of green finance at the micro level to improve IGTFP in
on how digital financial inclusion can help develop green finance. The Chapter 4.3.3.
marginal contribution of this study bridges these gaps in the literature.
3.3. Variables description
3. Methodology and data
(1) Explained variable (industrial green total factor productivity
3.1. Econometric models [IGTFP]): As the traditional DEA (Data envelopment analysis) method
for calculating GTFP has certain shortcomings (Tone, 2001), this study
This study analyzes the influence of green finance (GF) on IGTFP uses the SBM (Slacks-based model) method with CRS (Constant returns
based on the green growth theory (Smulders et al., 2014). It follows the to scale) to measure manufacturing productivity. Referring to Tone
model specification of Lee et al. (2022) and Yuan et al. (2020), and the (2001) and Lee et al. (2022), the model can be constructed to estimate
specific model is constructed as follows: the IGTFP for 281 cities in China from 2011 to 2019.

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Suppose there are k Decision Making Units (DMUs): the input vector Table 1
X = [x1 , x2 , …xn ] ∈ R+ m , the desirable output N 1 vector Y
g
= The evaluation index system of green finance (GF) and the input-output index
[ g g ] system of industrial green total factor productivity (IGTFP).
y1 , y2 , …ygn ∈ R+ N1 , and the desirable output vector Y g
=
[ g g ]
y1 , y2 , …ygn ∈ R+ . The non-zero assumption applies to all input-output Dimension First-order Second- Index description Property
N2
index order index
factors. The production possibility set is defined as follows:
{( ( ) } The evaluation index system of GF
P= x, yg yb ) |x ≥ Xθ, yg ≥ Y g θ, yb ≥ Y b θ, θ ≥ 0 (5) Green Government Green Fiscal expenditure Negative
Finance (GF) green fiscal on environmental
financial support protection / fiscal
where θ is a non-negative intensity vector for all the input-output fac­
activities general budget
tors. Under resource and environmental constraints, the SBM model for expenditure
IGTFP can be expressed as Green Investment of Positive
∑M s−j0
investment Environmental
Pollution
1
1− m
(6)
j=1 xj0
ρ∗ = min ( ) Treatment /total
1
∑N 1 sp
g ∑N 2 sbq regional GDP
1 + N1 +N p=1 yg +
Green Green Income from Positive
2 q=1 yb
p0 q0

financial insurance agriculture

products insurance /gross
∑
M ∑
N1 ∑
N2
output value of
s.t.xj0 = λj xj − s−i ; ygp0 = λp ygp − sgp ; ybq0 = λq ybq + sbq ; s−i , sgp , sbq , λ
agriculture
j=1 j=1 j=1
Green Interest expenses Negative
≥0 credit of high energy-
consuming
(7)
industries/total
In Eq. (2), ρ * indicates the target efficiency value in the range [0,1] interest expenses
The input-output index system of IGTFP
and s = (s−i ,sgp , sbq ) is a slack vector corresponding to the inputs and
Industrial Input Labor Total number of Positive
outputs. A DMU is efficient only if ρ * = 1 and the slack vector = 0. To Green Total industrial
distinguish efficiency among DMUs with ρ * = 1, we introduce a super Factor employees
efficiency SBM model (Tone, 2002) as follows: Productivity Capital Total assets of Positive
(IGTFP) industrial
1
∑M x enterprises above
(8)
m j=1 xj0
ρ∗∗ = min ( ) designated scale
1
∑N1 yg ∑N2 yb Energy Total industrial Positive
1+ N1 +N2 p=1 yg + q=1 yb energy
p0 q0
consumption
Expected Industrial The value-added of Positive
∑
M ∑
N1 ∑
N2
Output output the secondary
s.t.x ≥ g
λk xjk ; y ≤ λk ygpk ; yb ≥ λk ybqk ; x g
≥ xjk , y ≤ ygpk , yb industry
k=1,∕
=0 k=1,∕
=0 k=1,∕
=0 Unexpected Waste Industrial Negative
≥ ybqk , sbq , λk > 0 (9) Output water wastewater
emissions
Here, ρ∗∗ denotes the super-efficiency value of the DMU, which is Waste gas Industrial sulfur Negative
dioxide (SO2 )
larger than 1. s = (x, yg , yb ) represents the input and output vectors, emissions
respectively. Waste Industrial smoke Negative
This study constructs an input-output index system of IGTFP from the smoke dust dust emissions
input, expected output, and unexpected output dimensions (see
Table 1). The input factors include labor, capital, and energy. Labor
investment in environmental pollution control relative to the total
input is measured by the number of industrial employees in each city in
regional GDP. In the green financial product indicator dimension, this
China, represented by the total assets of industrial enterprises above the
study characterizes green credit by the proportion of interest expendi­
designated size and deflated by the fixed asset price index, using 2003 as
ture of six high-energy-consuming industries to that of all industries
the base period. Energy input was measured by the total urban industrial
based on existing research. The GF development indices of 30 Chinese
energy consumption, calculated by the proportion of industrial end-use
provinces were obtained by using the entropy weight method and the GF
energy consumption of each province and city, and the energy con­
indices are matched to 281 cities by region.
sumption per 10,000 Yuan GDP and GDP data for each city. Considering
(3) Mechanism variable (green technological innovation
data availability limitations, the expected output is measured by the
[GTI]): Referring to Tang et al. (2021), invention patents are often
value-added index of the secondary industry in each city and deflated by
considered visual manifestations of technological innovation. The
the industrial producer ex-factory price index, using 2003 as the base
number of granted patents indicates that the quality and capability of
period. Unexpected outputs were industrial wastewater, waste gas, and
the GTI is greater than the number of applications. Therefore, this study
soot emissions. These indicators were used to calculate the IGTFP of
uses the number of green patents obtained by cities in the current year to
each municipality using MATLAB software.
indicate the GTI. The data were obtained from the Chinese Research
(2) Core Explanatory variable (green finance [GF]): According to
Data Services database.
the theoretical research of Wang and Wang, (2018) and Lv et al. (2021),
(4) Control variables. Numerous factors, including green finance,
this paper argues that GF should include both government and market
may influence IGTFP. Based on the studies of Wu et al. (2020), Feng and
green financial activities. Therefore, referring to Shi and Shi (2022) and
Chen, (2018), and Tang et al. (2020), the control variables were selected
Zhang et al. (2022), we construct a green finance index system based on
as follows: foreign investment level (FI), represented by the proportion
government green financial activities and products. Table 1 presents the
of foreign direct investment in GDP; industrial structure (IS), repre­
evaluation index system. In the dimension of government green finan­
sented by the proportion of the output value of the tertiary industry in
cial activity indicators, government green finance is represented by the
GDP; level of education development (ED), measured by the share of
share of fiscal link protection expenditure in fiscal general budget
employees in the research and education sector in the total number of
expenditure. Green investment is characterized by the percentage of

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households registered at the end of the year; the urbanization level (UL), Table 3
measured by the proportion of the urban population in the total popu­ Nomenclature for the abbreviation of this article.
lation; the labor structure (LS), represented by the proportion of private Symbol Description Symbol Description
and self-employed workers in urban areas to the total number of urban
IGTFP Industrial green total factor FI Foreign investment
employees. In addition, this study considers the mechanism and some productivity
control variables by adding one and then taking the logarithm. GF Green finance IS Industry structure
GTI Green technological innovation ED Education
development
3.4. Data sources and descriptive statistics DEA Data envelopment analysis UL Urbanization level
SBM Slacks-based model LS Labor structure
The datasets generated and analyzed in the current study are avail­ CRS Constant returns to scale GDP Gross domestic
product
able from the China Statistical Bureau, China City Statistical Yearbook,
DMU Decision making unit, VIF Variance inflation
China Science and Technology Statistical Yearbook, China Economy factor
Information database, Wind database, China Stock Market and Ac­ ML Malmquist-Luenberger DFI Digital financial
counting Research database, China Energy Statistical Yearbook, and inclusion
provincial and municipal statistical yearbooks. The sample excludes GDFI The coordination effect of green OLS Ordinary least
finance and digital financial squares
Hong Kong, Macao, Taiwan, Tibet, and cities with missing indicator inclusion
data. The panel period was 2011–2019, and 2529 samples were ob­ 2WFE Two-way fixed effect 2SLS Two-stage least
tained. We treat the aggregate and level category data separately, take squares regression
the control variables as logarithms and treat all variables with a two-
sided 1% winsorization. Table 2 presents the descriptive statistics of
in IGTFP. Among the control variables, industrial structure and urban­
these indicators.
ization level are negatively correlated with IGTFP at the 5% level, likely
For ease of reading, the nomenclature for the abbreviation used in
because when resources in the government and market are invested
this paper is shown in Table 3.
more in the tertiary industry, its output value share increases. Pursuing
the upgradation of industrial institutions is a frequent motivation for
4. Empirical results and discussion
government and market entities. The upgrading of industrial structure
generally manifests as an increase in the proportion of output from the
4.1. Baseline regression analysis
tertiary industry (Wu et al., 2020). In contrast, the resources invested in
the industry department are squeezed out, showing a negative correla­
An appropriate estimation method should be chosen for analyzing
tion between the industrial structure and IGTFP. Industrial enterprises
panel data. The results in Table 4 are the correlation analysis between
are typically located further from urban centers, increasing urbanization
the main variables. The correlation coefficient between green finance
means more people live and work in cities. Due to the constraints of
(GF) and IGTFP is 0.116, and is significantly positive at the 1% level.
commuting costs and other factors, their chosen occupations are in­
Green technology innovation (GTI) is also significantly positively
clined to the tertiary industry, so urbanization is negatively correlated
correlated with IGTFP at the 1% level. The correlation coefficients of
with IGTFP.
other variables are within a reasonable range. This can preliminarily
illustrate the rationality of the hypothesis in this paper. Then we draw
the figure of the relationship between IGTFP and GF. It can be seen from 4.2. Robustness testing
the Fig. 1. that GF has a clear positive correlation with IGTFP. This is
consistent with our theoretical analysis and assumptions. As to the po­ (1) Adjust the sample period. China initiated the G20 Green
tential multicollinearity among the variables, we use the variance Finance Study Group in 2016, and seven Ministries and Commissions
inflation factor (VIF) method. The results in Table 5 indicate no severe jointly issued The Guidance on Building a Green Financial System in the
multicollinearity. In order to test the hypothesis of this article and same year. Since then, green finance has achieved multilayered local
specific relationship among the variables, further multiple regression and international cooperation. Considering that the relevant policies of
analysis is necessary. the country after 2016 may have affected the research results, data
We constructed basic ordinary least squares (OLS) and two-way fixed during 2011–2016 were selected for the regression. As shown in Table 7,
effects (2WFE) panel data regression to study how GF influences IGTFP. the regression coefficient of GF is 3.567, significantly positive at the 1%
The baseline regression results are presented in Table 6. Columns (1)-(2) level.
are the results of the time fixed and two-way fixed effect regressions (2) Replace the explained variable. Referring to the classical
without control variables. Also, columns (3)-(4) show the regression practice of calculating total factor productivity, the input indicators of
results after adding the control variables. Column (4) shows that the the explanatory variables were adjusted for capital and labor factors.
coefficient of green finance (GF) is 1.710, positively significant at the 1% Capital input was replaced with the capital stock of urban industrial
level. This indicates that GF can effectively improve IGTFP, and one enterprises to calculate IGTFP, replacing the original explained variable.
standard deviation increase in green finance results in an 1.71% increase The results show that the regression coefficient of GF is 1.151,

Table 2
Definition and statistical description of variables.
Variable Definition Sample size Mean value Standard deviation Minimum value Maximum value

Explained variable IGTFP Industrial green total factor productivity 2529 1.110 0.403 0.291 3.375
Explanatory variable GF Green financial 2529 0.177 0.071 0.085 0.402
Control variables FI Foreign investment 2529 0.814 0.562 0.001 2.122
IS Industry structure 2529 0.342 0.068 0.190 0.533
ED Education development 2529 0.123 0.051 0.034 0.280
UL Urbanization level 2529 0.118 0.081 0.034 0.469
LS Labor structure 2529 4.621 0.602 1.646 7.447
Mechanism variable GTI Green technological 2529 2.879 1.696 0 7.283
Innovation

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Table 4
Correlation analysis results of main variables in the baseline regression analysis.
IGTFP GF GTI GDFI FI IS ED UL LS

IGTFP 1
GF 0.116*** 1
GTI 0.114*** 0.464*** 1
GDFI 0.123*** 0.799*** 0.527*** 1
FI 0.0120 0.056*** 0.381*** 0.0280 1
IS 0.034* 0.394*** 0.507*** 0.542*** 0.123*** 1
ED -0.0270 -0.225*** -0.460*** -0.271*** -0.339*** -0.143*** 1
UL 0.051** 0.301*** 0.509*** 0.277*** 0.253*** 0.318*** -0.658*** 1
LS 0.084*** 0.163*** 0.110*** 0.253*** 0.039** 0.195*** 0.159*** -0.151***

Note: N = 2528, “*”, “**” and “***” mean passing the significance level test of 1%, 5%, and 10%, respectively.

4.3. Further discussion

4.3.1. Heterogeneity analysis

Differences in city sizes are essential factors that cannot be ignored in
green financial activities and urban industrial development. Therefore,
based on whether the urban area has 1million permanent residents, this
study divided the sample cities into small and medium sized cities, and
large cities for analysis. Furthermore, according to the government’s
notice on city size division, the two sample cities were divided into two
categories respectively. Mega cities have more than 5million permanent
residents, and small cities have a permanent resident population of less
than half a million. The results in columns (1)-(2) of Table 8 show that
the coefficient of GF in large cities, 2.256, is larger than that in small &
medium cities,1.640 at the significance level of 5%. GF significantly
contributes to IGTFP in large and small & medium-sized cities, and has a
stronger effect on large cities. Specifically, in columns (3)-(6), the pro­
motional effects of GF on IGTFP in large and medium sized cities are
significant. The coefficients in megacities and small cities is positive but
fails to pass the significance test, perhaps because the sample size is too
small to support the significance test. In general, the influence of GF on
Fig. 1. The influence of green finance (GF) on industrial green total factor IGTFP shows significant differences across cities of different sizes, and
productivity (IGTFP). this effect increases with the expansion of city size. A possible reason for
this is that city size determines the ability of local governments to sup­
significantly positive at the 5% level, supporting the study’s findings to a port green financial activities. Generally, the larger city, the more
certain extent. adequate the demand for green financial products. Meanwhile, larger
(3) Select subsamples. Differences in the resources and policies of cities’ financial market structures and operational mechanisms, digital
different cities may affect the effects of green financing on the IGTFP. infrastructure settings, and supporting conditions for industrial devel­
Subsamples were selected for regression analysis, excluding the capital opment are also more complete, which is conducive to giving full play to
cities of the sub-provincial cities and municipalities directly under the the positive effect of GF on IGTFP.
central government. The results show that the GF regression coefficient
is 5.314, significantly positive at the 1% level. 4.3.2. Mechanism analysis of green technological innovation
(4) Use the instrumental variable approach to mitigate endo­ The existing literature has demonstrated that GTI is important in
geneity. Green finance can promote IGTFP; however, the industry is promoting total factor productivity (Xie et al., 2020; Wang et al., 2021;
vital for green finance and digital financial inclusion. Therefore, IGTFP Lee et al., 2022). This study also theoretically analyzed the mechanism
may also affect green finance and its integration with digital financial effect of GTI in the process of GF influencing IGTFP. We then use the
inclusion. Thus, two-way causality exists, and a two-stage least squares econometric model in Formula (2) to empirically test the mechanism of
(2SLS) method is adopted to alleviate endogeneity. Referring to existing green technological innovation. Columns (1) – (4) of Table 9 show the
studies, the explanatory variable with two lags was used as the instru­ regression results of the mechanism effect of GTI in the full sample and
mental variable to satisfy the relevance and exclusivity requirements as the eastern, central, and western cities of China. The coefficient of GF in
the instrumental variable. As shown in Table 7, the coefficient of GF is Columns (1) is 2.963, positively significant at the 1% level. This in­
significantly positive, at least at the 10% level. It indicates that a sig­ dicates that GF can effectively improve GTI, and one standard deviation
nificant positive influence of green finance (GF) on the IGTFP when increase in green finance results in an 2.963% increase in GTI. Combined
endogeneity is considered. with the theoretical analysis of GTI influencing IGTFP, these results
Overall, the robustness testing results support our main finding that indicate that green technological innovation has a considerable mech­
GF can effectively improve IGTFP. anism effect in the process of green finance influencing IGTFP. This

Table 5
Multicollinearity test results of main variables.
Variable GF GTI FI IS ED UL LS GDFI Mean

VIF 2.22 2.14 1.31 1.73 2.38 2.62 1.21 2.81 2.05
1/VIF 0.451 0.468 0.761 0.579 0.421 0.381 0.825 0.356 0.530

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Table 6 economic infrastructure in the eastern and central regions are more
The influence of green finance (GF) on industrial green total factor productivity complete than in the western region. The relatively low level of financial
(IGTFP). marketization in the western region restricts the approval and efficiency
Variables （1） （2） （3） （4） of green credit and green insurance, which hindering the mechanism
IGTFP IGTFP IGTFP IGTFP effect of green technological innovation. In contrast, the central region
GF 0.588*** 1.686*** 0.510*** 1.710*** has more development space for green finance and green technological
(0.12) (0.64) (0.13) (0.65) innovation than the eastern region. Thus, the mechanism effect of green
FI 0.005 0.012 technological innovation can be better released in the process of GF
(0.02) (0.03)
influencing IGTFP.
IS -0.375** -0.868**
(0.15) (0.40)
ED 0.346 0.435 4.3.3. Discussion on the coordination effect of green finance (GF) and
(0.23) (0.52) digital financial inclusion (DFI)
UL 0.470*** -0.895** The theoretical analysis section above attempts to demonstrate how
(0.16) (0.45)
digital financial inclusion (DFI) supports the development of green
LS 0.060*** 0.100***
(0.02) (0.03) finance (GF), and analyzes the coordination effect between GF and DFI
Constant 0.945*** 0.796*** 0.700*** 0.632*** and its influence on IGTFP. In this study, we used GDFI to represent this
(0.03) (0.09) (0.08) (0.23) coordination effect. Therefore, to discuss the positive influence of GDFI
R2 0.037 0.034 0.046 0.049
on IGTFP, this study constructs a GDFI index for empirical testing. In the
F/Wald 10.77*** 8.727*** 8.640*** 8.272***
Observations 2529 2529 2529 2529
model setting, we use the Peking University Digital Financial Inclusion
Time FE YES YES YES YES Index to represent the digital financial inclusion system and the green
Individual FE NO YES NO YES finance index constructed in this study to represent the green finance
Note: (1) “*”, “**” and “***” mean passing the significance level test of 1%, 5%,
system. The regression results are present in Table 10 and Table 11.
and 10%, respectively. (2) The values in parentheses are standard errors. The baseline regression result in column (2) of Table 10 shows that
the coefficient of GDFI is 0.866, positively significant at the 1% level,
indicating that one standard deviation increase in the coordination ef­
Table 7 fect results in an 0.866% increase in IGTFP. Columns (3) - (6) show the
Robustness test regression results of green finance (GF) on industrial green total robustness test results, and the methods are the same as those for the
factor productivity (IGTFP). robustness test in Section 4.2. The results demonstrate that GDFI con­
Variables （1） （2） （3） （4） tributes to IGTFP growth at least at the 5% significance level; the
Adjust Replace Select Use 2SLS method
sample explained subsamples to mitigate
Table 9
period variable endogeneity
Mechanism effect of green technological innovation (GTI) test results for green
IGTFP IGTFP IGTFP IGTFP finance (GF) on IGTFP.
GF 3.567*** 1.151** 5.314*** 1.959* Variables （1） （2） （3） （4）
(1.75) (0.52) (1.25) (1.02) Full Eastern Central Western
Control Yes Yes Yes Yes sample regions regions regions
variables
Constant 0.336 0.752*** 0.212 0.537 GTI GTI GTI GTI
(0.51) (0.18) (0.34) (0.53) GF 2.963*** 1.677* 8.981*** 3.778
R2 0.060 0.083 0.067 0.191 (1.01) (0.87) (2.59) (2.39)
F/Wald 10.77*** 14.52*** 9.135*** 448.8*** Control Yes Yes Yes Yes
Observations 1 686 2 529 1 836 1 967 variables
Time FE Yes Yes Yes Yes Constant 0.951*** 2.231*** -0.560 0.609
Individual FE Yes Yes Yes Yes (0.34) (0.43) (0.61) (0.48)
R2 0.539 0.636 0.540 0.487
Note: (1) “*”, “**” and “***” mean passing the significance level test of 1%, 5%,
F/Wald 93.61*** 98.02*** 44.60*** 43.47***
and 10%, respectively. (2) The values in parentheses are standard errors.
Observations 2 529 900 891 738
Time FE Yes Yes Yes Yes
effect is evident in the eastern and central region but insignificant in the Individual FE Yes Yes Yes Yes
western region, and the positive effect is most significant in the central Note: (1) “*”, “**” and “***” mean passing the significance level test of 1%, 5%,
region. This may be because financial development and related and 10%, respectively. (2) The values in parentheses are standard errors.

Table 8
Heterogeneity regression results of green finance (GF) on industrial green total factor productivity (IGTFP).
Variables （1） （2） （3） （4） （5） （6）
Large Small & medium Mega Large Medium Small

IGTFP IGTFP IGTFP IGTFP IGTFP IGTFP

GF 2.256* 1.640** 4.089 2.522* 1.574* 5.349

(1.25) (0.79) (3.87) (1.36) (0.80) (4.25)
Control variables Yes Yes Yes Yes Yes Yes
Constant 0.242 0.799 1.497 0.086 0.989*** 1.144
(0.44) (0.28) (1.43) (0.48) (0.30) (1.00)
R2 0.064 0.051 0.232 0.057 0.062 0.050
F-value 3.906*** 5.440*** 1.832* 2.986*** 6.210*** 0.279
Observations 918 1 611 117 801 1 512 99
Time FE Yes Yes Yes Yes Yes Yes
Individual FE Yes Yes Yes Yes Yes Yes

Note: (1) “*”, “**” and “***” mean passing the significance level test of 1%, 5%, and 10%, respectively. (2) The values in parentheses are standard errors.

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Table 10
Baseline regression and robustness test results of the coordination effect (GDFI) on IGTFP.
Variables （1） （2） （3） （4） （5） （6）

Baseline regression Adjust sample period Replace explained variable Select subsamples Use 2SLS method to mitigate endogeneity

IGTFP IGTFP IGTFP IGTFP IGTFP IGTFP

GDFI 0.807*** 0.866*** 1.096*** 0.718*** 1.120*** 0.949**

(0.23) (0.23) (0.42) (0.20) (0.32) (0.43)
Control variables No Yes Yes Yes Yes Yes
Constant -0.276 -0.508 -0.908 -0.241 -0.808* -1.769
(0.37) (0.48) (0.84) (0.40) (0.63) (1.47)
R2 0.040 0.055 0.061 0.091 0.065 0.193
F-value 11.20*** 10.45*** 11.10*** 14.39*** 8.326*** 450.9***
Observations 2 529 2 529 1 686 2 529 1 836 1 967
Time FE Yes Yes Yes Yes Yes Yes
Individual FE Yes Yes Yes Yes Yes Yes

Note: (1) “*”, “**” and “***” mean passing the significance level test of 1%, 5%, and 10%, respectively. (2) The values in parentheses are standard errors.

Table 11
Heterogeneity analysis and mechanism analysis results of the coordination effect (GDFI) on IGTFP.
Variables （1） （2） （3） （4） （5） （6）
Large Small & Full Eastern Middle Western
medium sample regions regions regions

IGTFP IGTFP GTI GTI GTI GTI

GDFI 1.072*** 0.792*** 1.273*** 0.696** 2.158*** 1.073**

(0.45) (0.30) (0.25) (0.28) (0.45) (0.47)
Control variables Yes Yes Yes Yes Yes Yes
Constant -1.069 -0.248 -0.642 1.356** -2.780*** -0.606
(0.84) (0.60) (0.53) (0.64) (0.78) (0.82)
R2 0.071 0.056 0.543 0.637 0.544 0.489
F-value 5.939*** 6.541*** 90.64*** 98.48*** 66.27*** 43.86***
Observations 918 1 611 2 529 900 891 738
Time FE Yes Yes Yes Yes Yes Yes
Individual FE Yes Yes Yes Yes Yes Yes

Note: (1) “*”, “**” and “***” mean passing the significance level test of 1%, 5%, and 10%, respectively. (2) The values in parentheses are standard errors.

baseline regression results are relatively convincing. In Table 11, Col­ the mechanism of green technological innovation by using panel data at
umns (1) - (2) show the heterogeneity test results of GDFI on IGTFP, the provincial and city levels in China. It also explores the role of digital
indicating that the coordination effect can positively influence IGTFP financial inclusion in supporting green finance at the micro-level. The
varies from different cities,and it‘s more obvious in large cities. We also research conclusions are as follows.
argue that GTI is an important mechanism for this coordination effect on (1) The baseline regression analysis shows that there is a significant
IGTFP. The mechanism analysis result in column (3) of Table 11 shows positive correlation between GF and IGTFP, which shows that the pro­
that the coefficient of GDFI is 1.273, positively significant at the 1% moting of green finance can effectively improving industrial green
level, indicating that one standard deviation increase in the coordina­ development. This will contribute to achieving the green, low-carbon
tion effect results in an 1.273% increase in IGTFP. The results in column and sustainable development goal. We adopt a series of robustness
(4) - (6) show that the gap between the mechanism effects of GTI in tests to verify the persuasion of this result, including adjusting the
different regions has been significantly narrowed compared with the sample period, replacing the explained variable and selecting sub­
influencing process in the baseline regression. This demonstrates that samples. This conclusion is still convincing after using instrumental
the constraints of developing green finance were eased by integrating variable method to deal with potential endogeneity.
the advantages of DFI. Financial digitalization and inclusiveness have (2) The heterogeneity analysis indicates that the influence of GF on
enhanced the participation of market entities, and expanded the capital the IGTFP varies from different cities, and this effect increases with the
sources of green finance in the central and western regions. This further expansion of city size. A possible reason is that city size determines the
indicates that digital financial inclusion can compensate for the lack of ability of local governments to support green financial activities.
micro-support for developing green finance, so as to deepen industrial Generally, the larger city, the more adequate the demand for green
green development in China. financial products. Meanwhile, larger cities’ financial market structures
and operational mechanisms, digital infrastructure settings, and sup­
5. Conclusions and policy implications porting conditions for industrial development are also more complete,
which is conducive to giving full play to the positive influence of GF on
This study has both theoretical and practical significance. Against IGTFP.
the backdrop of the prosperity of green finance and countries’ long-term (3) The mechanism analysis supports that green technological
plans to vigorously promote the green development of industry, this innovation has an essential mechanism effect in the process of green
study includes green finance, green technological innovation, and IGTFP finance influencing IGTFP. And this effect varies in different regions of
within the same research framework. Based on a theoretical analysis, China, with the most pronounced positive effect in the central region.
this study constructs an evaluation index system to measure the GF This may because financial development and related economic infra­
levels by using the entropy method，and measures IGTFP index by using structure in the eastern and central regions are more complete than in
super-efficiency slacks-based model with Malmquist-Luenberger index the western region. And the central region has more development space
method. It empirically tests the influence of green finance on IGTFP and for GF and GTI than the eastern region. Thus, the mechanism effect of

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GTI can be better released in the process of GF influencing IGTFP. the valuable and insightful comments. Foundation: This work was sup­
(4) The discussion on the coordination effect of green finance and ported by the general project of Guangdong Provincial Natural Science
digital financial inclusion indicates that digital financial inclusion can Foundation [grant numbers 2021A1515012559].
compensate for the lack of support for developing green finance, so as to
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