Abstract
<title>Abstract</title> <p>This study examines whether verified transition finance can serve as an effective climate mitigation strategy for carbon-intensive firms. Using Chinese A-share listed carbon-intensive firms from 2012 to 2024, we identify treatment by each firm's first receipt of auditable transition-finance support, including transition bonds, transition loans, sustainability-linked instruments, and pre-2019 green-finance instruments only when their disclosed use of proceeds directly supports low-carbon upgrading of existing high-emission operations. Based on a staggered difference-in-differences design, the results show that transition finance significantly improves corporate ESG performance, with effects emerging in the treatment year and strengthening over time. Mechanism tests indicate that transition finance supports mitigation-oriented change by increasing green capital expenditure, stimulating green invention patents, and reducing carbon-emission intensity. Heterogeneity analysis shows stronger effects in state-owned and highly digitalized firms, firms with greater path dependence and technology lock-in, eastern and central regions, and sectors with clearer mitigation pathways, including electric power, steel, non-ferrous metals, and petrochemicals. Further analysis shows that ESG improvements associated with transition-finance exposure enhance firm value. These findings contribute to climate mitigation strategy research by showing how targeted financial-policy instruments can mobilize incumbent high-emission firms to invest in cleaner technologies, reduce emissions intensity, and preserve economic value during low-carbon transition.</p>