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ABSTRACT This study examines the influence of green credit policies (GCP) on banking financial performance (FP), emphasizing the moderating role of climate change practices (CCP). Using a stakeholder theory and legitimacy theory framework, we explore how green credit initiatives impact key financial metrics such as return on equity (ROE), earnings per share (EPS), and Tobin's Q. The study utilizes a dataset covering 14 Jordanian banks from 2016 to 2023, applying regression models to test the proposed relationships. Our findings reveal a positive and significant relationship between GCP and FP, indicating that banks with stronger GCP tend to experience enhanced financial outcomes. Additionally, CCP reinforces this positive effect, demonstrating that environmental transparency fosters financial resilience and long‐term sustainability. Robustness checks confirm the validity of our results, mitigating concerns regarding reverse causality and endogeneity bias. This study contributes to the green finance literature by providing empirical evidence on the financial benefits of GCP, particularly in the context of developing economies. The research underscores the strategic importance of integrating sustainability‐driven policies into banking operations to achieve both financial and environmental objectives. Our findings hold substantial policy implications, advocating for regulatory frameworks that promote green finance transparency. For banking institutions, this study highlights the competitive advantage of embedding sustainability into corporate strategies, ultimately enhancing market valuation and profitability.
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