As global sustainability imperatives increase, understanding how green finance policies and technological innovation influence corporate environmental performance has become a relevant issue. This study examines the impact of green finance on corporate environmental practices, particularly focusing on how innovation enhances sustainable energy transitions. A difference-in-differences (DID) approach was employed. This research compares corporate environmental performance before and after the implementation of green finance policies across treated and control groups. This method allows for isolating the effect of green finance by controlling for temporal and individual factors, providing robust insights into policy efficacy. Our findings indicate a statistically significant improvement in environmental performance, particularly among larger, state-owned enterprises in China’s eastern regions. The findings also underscore the moderating role of innovation in optimizing green finance outcomes. Finally, important implications for policymakers aiming to drive corporate sustainability are offered.