The use of green finance to slow down global warming in support of sustainable development remains widely discussed. This study examines whether investment structure moderates the impact of green finance on the environment in China, one of the top carbon-emitting nations and the second-largest economy in the world. We primarily used the moments-quantile regression approach with fixed-effect models on panel data from 1992Q1 to 2020Q4. First, the results confirmed that green finance and public and private investments worked synergistically to lower CO2 emissions, especially in Central and Western China. However, there was no proof that green finance and foreign direct investment were complementary in reducing CO2 emissions in China, unlike the Central region. Second, green finance marginally lowered CO2 emissions in all provinces, mainly in Eastern and Western China; this reduction was largely dependent on private investment in the Western region’s most polluting areas and foreign direct investment in Eastern and Western China’s least polluting provinces. Third, the beneficial effect of green finance occurred at varying optimal thresholds and investment-related conditions across Chinese regions at different quantiles. Lastly, we showed that in contrast to the variable impacts of urbanization, oil prices, and economic growth across Chinese regions at different quantiles, renewable energy, and trade openness reduced CO2 emissions. In conclusion, the study makes some policy recommendations for China’s sustainable economic development, an important model from which other countries can tailor their investment strategies and environmentally friendly policies.

Fighting global warming has become a vital requirement for environmental sustainability. Green finance has gained popularity as a promising mechanism for transitioning to a lowcarbon economy. Thus, this paper investigates whether excess green financing increases renewable energy capacities and enhances environmental quality from 1992Q1 to 2020Q4 in China, one of the major CO2 emitters. We primarily used the method of moments-quantile regression with fixed-effect models. First, we found nonlinear U-shaped impacts of green finance on wind power capacities in all Chinese regions, thermal power capacities in the Western and Central areas, and hydropower capacities in Eastern China, respectively. Second, we confirmed an inverted U-shaped impact of green finance on CO2 emissions in the Eastern region but U-shaped effects in the Western and Central regions. The impacts of green finance were asymmetrical due to the heterogeneous distributions of renewable energy sources and environmental quality within and between regions. Green finance mostly improved environmental quality when certain conditions and thresholds were met. Third, green finance had substantial marginal effects on environmental quality in the least polluted provinces (Q.20) in Western China and the most polluted provinces (Q.80) in Eastern China. Finally, there were heterogeneous effects of oil prices, urbanization, foreign direct investments, and trade openness on renewable energy consumption and environmental quality across Chinese provinces. Accordingly, this study provides some policy recommendations for China’s sustainable development, a key example from which the international community can adjust its green policies.