In recent years, China has achieved remarkable economic development and become the second largest economy in the world. However, in the extensive mode of economic development, serious pollution problems follow. With the rapid development of green finance, it is becoming a major trend to promote high-quality economic development through the development of green finance. At the same time, people are generally concerned about not only whether the development of green finance has an incentive effect on enterprise green innovation, but also what internal mechanism it relies on to promote enterprise green innovation.

In recent years, the Chinese government has made great efforts to develop green finance, which has become an important measure to promote green technological innovation and green development. Using the unbalanced panel data of 2058 listed companies in Shanghai and Shenzhen A-share market from 2011 to 2020, this paper empirically studies the impact and mechanism of green finance development on enterprise innovation. It is found that the development of green finance has a significant role in promoting enterprise innovation. The study of distinguishing patent types finds that at this stage, green finance has no significant impact on enterprise green invention patents, and has a significant positive impact on enterprise green non-invention patents. This conclusion is still valid after considering the potential endogenous problems and a series of robustness tests. At the same time, heterogeneity analysis shows that green finance has different impacts on enterprise innovation in different enterprise types and regions; mechanism analysis finds that green finance promotes enterprises to carry out green innovation activities by easing the financing constraints of enterprises. This paper also finds that green patent innovation can significantly improve the financial performance of enterprises. Therefore, the government should continue to vigorously strengthen the policy support for green finance and promote enterprises to carry out substantive green innovation, so as to ensure the healthy and sustainable development of green finance.

The marginal contributions of this paper are as follows: First, it not only studies the impact of green finance development on enterprise innovation from the micro enterprise level, but also systematically analyzes the impact mechanism of green finance development on enterprise innovation. Second, from the perspective of the impact of enterprise innovation on economic and environmental effects, it analyzes the internal mechanism of green finance development and enterprise innovation. Third, it discusses the heterogeneity of green finance in enterprise ownership, the degree of regional intellectual property protection and enterprise types. The conclusions can provide some theoretical references for “building a green finance system”.