Sustainable Transition or Symbolic Compliance? The Double‐Edged Sword of Green Finance Pilot Zones

Abstract

As green finance reforms accelerate globally, a critical question remains: do state‐led financial incentives drive genuine sustainability transitions, or do they inadvertently encourage symbolic compliance? Using China's Green Finance Reform and Innovation (GFRI) pilot zones as a quasi‐natural experiment, this paper investigates the “policy‐induced decoupling” effect, defined as the gap between compliance with policy mandates and actual environmental performance. Employing a difference‐in‐differences approach on Chinese listed enterprises from 2009 to 2021, we find that while the GFRI policy significantly improves ESG ratings, it simultaneously intensifies corporate greenwashing. Mechanism analysis reveals a distinct duality: the policy enhances ESG performance by alleviating financing constraints but also creates incentives for greenwashing, which are mitigated by informal regulation through media scrutiny and substantive R&D investment. Heterogeneity analysis further shows that non‐state‐owned and high‐tech enterprises are more prone to decoupling behavior due to survival pressures. This study contributes to environmental planning literature by demonstrating that without robust verification infrastructure, aggressive green finance policies can create a signaling paradox.