Integrating monetary and environmental goals: exploring the impact of green monetary policy on corporate environmental disclosure

Using a difference-in-differences (DID) methodology, this study examines how the expansion of China’s medium-term lending facility (MLF) policy to include green assets affects corporate environmental information disclosure. We construct a sample of Chinese A-share listed firms from 2015 to 2020, including a treatment group of firms with potential green credit projects and a control group of other firms. We find that after the June 2018 MLF collateral expansion, environmental disclosure significantly increases for the treatment firms relative to the control firms. This effect is robust to a variety of specifications and additional checks. Further analyses based on difference-in-differences-in-differences (DDD) models identify two mechanisms, financing and investment, through which green monetary policy may ease financing constraints and encourage green investment, which in turn increases environmental information disclosure. We also find that the policy has stronger effects on firms in more developed regions, areas with weaker prior environmental regulation, non-state-owned enterprises, and those with less transparent information. Our findings underscore the potential of green monetary policy as a tool to incentivize corporate sustainability practices and contribute to the literature by providing micro-level evidence of monetary policy’s environmental impact.