Can green credit reduce the emissions of pollutants?

To investigate the contribution of green credit (GC) to improving air quality in China, the bootstrap sub-sample rolling-window Granger causality test is employed. This test considers the structural changes of parameters that affect the accuracy of the conclusion and analyzes the dynamic relationship between GC and air quality. The sub-sample empirical results show that GC’s infancy and mature stages have diverse impacts on the environment. In the early stage of GC, due to a low proportion of GC in overall credit and lack of the incentive to provide GC for banking institutions, the environmental effect of GC has not been demonstrated. With the continuous improvement of the GC system, the positive effects of GC on air quality begin to emerge later, which is supported by GC and air quality interaction theory. This discovery is beneficial for policymakers to find flaws in the current GC system and grasp the direction of a well-designed GC policy to construct a modern economic system with sustainable development Moreover, this paper provides another perspective that air quality has a feedback effect on GC policy. This evidence that air quality is a leading indicator helps enterprises predict banking institutions’ credit preference changes and adjust financing strategies in advance. It is significant to build a virtuous cycle between GC and the environment and promote sustainable economic development.