Green　innovation　in　heavily　polluting　firms　is　crucial　for　sustainable　development,　yet　financial　constraints　remain　a　major　barrier.　This　study　employs　a　Spatial　Durbin　Model　to　analyze　how　financialization　influences　green　innovation　in　China’s　A-share　listed　firms.　The　results　indicate　that　financialization　intensifies　financing　constraints,　leading　to　a　suppression　of　green　innovation.　This　effect　is　primarily　driven　by　the　“crowding-out　effect”,　which　outweighs　the　“reservoir　effect”　that　financialization　may　provide.　Additionally,　industry-wide　peer　effects　further　spread　the　negative　impact,　while　agency　conflicts　and　managerial　incentives　exacerbate　the　problem.　Regional　disparities　are　also　observed,　with　stronger　negative　effects　in　eastern　and　central　regions　and　among　firms　with　high　managerial　compensation.　To　address　these　issues,　the　study　recommends　strengthening　policy　guidance,　expanding　green　finance　mechanisms,　promoting　industry　collaboration,　and　improving　corporate　governance.　These　findings　enhance　our　understanding　of　the　dual　impact　of　financialization　on　green　innovation　and　provide　actionable　policy　recommendations　for　achieving　sustainable　development　in　high-pollution　industries.　©　2025　by　the　authors.