Abstract

The goal of green finance is to pursue the coordinated development of financial activities, environmental protection, and ecological balance. This study aims to examine the impact of green finance on economic development and environmental quality. Data concerning green finance, economic development, and environmental quality for 30 provinces and municipalities in China from 2010 to 2017 are used. First, the global principal component analysis is adopted to develop a green finance development index. Second, a model of the impact of green finance on economic development is constructed, which indicates that the development of green finance plays a role in promoting economic development. Next, emissions of industrial smoke (powder) dust, industrial solid waste, and carbon dioxide are used to represent the environmental variables, and a model of the impact of green finance on environmental quality is proposed. The model shows that green finance has a positive effect on environment improvement. However, the impact of green finance on environmental quality varies for different levels of economic development. Finally, based on the theory of the environmental Kuznets curve, a model of the impact of green finance on the relationship between economic development and environmental quality is developed. The model indicates that green finance can significantly improve this relationship, creating a win-win situation regarding economic development and the environment.