Green finance policy and climate adaptation innovation: evidence from China

Purpose This study examines whether China's Climate Investment and Financing Policy (CIF) promotes firms' climate adaptation innovation and explores the underlying mechanisms and boundary conditions. Design/methodology/approach Using Chinese A-share listed firms and the CIF pilots as a quasi-natural experiment, we implement a difference-in-differences design with firm and year fixed effects. Climate adaptation innovation is measured by firms' Y02A patent applications. We conduct event-study and placebo tests and a battery of robustness checks, including entropy balancing, PPML, Logit models and controlling for concurrent green policies. Findings CIF significantly increases firms' climate adaptation innovation. The effect is robust across alternative specifications. Mechanism evidence shows that CIF expands new loan financing and institutional ownership and increases firms' R&D intensity and the share of R&D personnel. Cross-sectional tests indicate stronger effects in regions with higher climate policy uncertainty and among firms with more extensive carbon disclosure. Additional analyses show that CIF improves environmental performance and reduces firms' climate risk. Originality/value This study provides causal evidence that a comprehensive climate investment-and-financing policy package can foster adaptation-oriented innovation, complementing prior green-finance research that predominantly emphasizes mitigation innovation.