["Asian-Pacific Economic Literature, EarlyView. ", "\nABSTRACT\nWith the rapid development of China's economy, green finance has emerged as a pivotal instrument for promoting corporate green transformation and sustainable development. Using data from Chinese listed companies from 2009 to 2022, this study adopts a generalised difference‐in‐differences (DID) approach to assess the influence of green credit interest subsidy policies on corporate environmental governance performance (GGP). The results demonstrate that these subsidies significantly contribute to enhancing firm's governance performance. Mechanism analysis reveals that the improvement in GGP is primarily driven by reduced financing costs and heightened environmental attention. Moreover, further analysis shows that the policy effects vary significantly across firms of different types and sizes. Firms characterised by higher institutional ownership, stronger profitability, and those in non‐heavy pollution industries exhibit more pronounced improvements in GGP under the green credit subsidy policy. This study provides robust empirical evidence in support of sustainable development and offers valuable insights for the optimisation of green finance policies.\n"]