Despite growing emphasis on financial firms’ engagement in environmental project financing (EPF), its impact on insolvency risk remains underexplored. Drawing on signaling theory, this study investigates how EPF influences financial institutions’ insolvency risk and examines the moderating roles of the existence of a public relations function and global climate policy uncertainty. By analyzing data of 291 financial firms from major developed economies over 2014–2023, this study finds that environmental project financing reduces insolvency risk. Furthermore, the presence of a public relations function strengthens this effect, while the rising global climate policy uncertainty weakens it. This study contributes to existing literature while offering both strategic insights and practical implications.