The Impact of Green Finance on Corporate Environmental Performance: The Moderating Role of Economic Policy Uncertainty

Despite a growing body of literature on green finance as an intervening variable in Corporate Environmental Performance (CEP), empirical studies often fail to consider the role of Economic Policy Uncertainty (EPU) as a contextual factor. This paper examines the role of Economic Policy Uncertainty (EPU) in moderating green finance and Corporate Environmental Performance (CEP) in developed and emerging economies from 2014 to 2024. By using a difference-in-differences (DID) fixed effects design with nonlinear and threshold analysis, we find that green financing improves CEP. We demonstrate that high levels of EPU reinforce the positive impact of green finance (alongside CEP) - particularly in emerging economies characterised by lower institutional quality and regulatory instability. Nonlinear analyses suggest that the reinforcement effect of EPU will reduce at high levels of uncertainty indicating a more nuanced interaction that is context-dependent. The fact that we strictly observed placebo tests and robustness measures validates a causal interpretation. This paper extends theoretical understanding and offers practitioners implications for public policy by considering policy uncertainty in relation to green finance impact on CEP, enriching sustainable business practice under significant uncertainty. Our research demonstrates that green finance significantly influences corporate environmental performance; nevertheless, its effectiveness is intricately affected by regulatory uncertainty, with emerging markets exhibiting majority sensitivity than industrialized markets.