This　paper　examines　the　relationship　between　directors＇　and　officers＇　liability　insurance　(D&O　insurance)　and　firms＇　green　innovation.　Using　a　large　dataset　on　firms＇　green　innovation　achievements　of　Chinese　listed　firms　over　2002–2019,　we　show　that　firms　with　D&O　insurance　significantly　boost　their　green　innovation　performance,　particularly　those　facing　higher　litigation　risks,　without　political　connections,　and　exhibiting　corporate　governance.　Additionally,　we　find　that　the　green　innovation　of　insured　firms　significantly　bolsters　firm　value,　indicating　that　D&O　insurance　helps　achieve　a　win-win　situation　between　shareholder　value　and　environmental　sustainability.　The　mechanism　analysis　shows　that　the　supervision　effect　of　D&O　insurers　in　mitigating　managerial　self-interest　behavior　is　the　underlying　channel　through　which　D&O　Insurance　affects　firms’　green　innovation.　Overall,　our　findings　suggest　that　D&O　insurance　encourages　firms＇　directors　and　officers　to　actively　pursue　green　innovation,　thereby　positively　impacting　firm　value.　©　2024