<p>The development of green finance is crucial for China’s economic and long-term environmental sustainability. This study examines the impact of government-led green finance on green total factor productivity (GTFP) at the enterprise level in China’s polluting and environmental protection industries from 2005 to 2022. It explores how green transformation moderates this relationship and examines, in particular, the potential heterogeneity and industry spillover effects from green bond issuance. Our findings reveal that in polluting industries, there is an inverted U-shaped relationship between green finance and GTFP. In contrast, this relationship is not significant in environmental protection industries. Green transformation positively mitigates the inverted U-shaped relationship. Further analysis reveals that, first, the relationship between green finance and GTFP is insignificant for enterprises with insufficient green behavior. Second, green transformation can exert a moderating effect by alleviating financing constraints. Additionally, companies that issue green bonds increase their GTFP and generate industry spillover effects by encouraging other firms to undertake green transformations. This study provides novel insights and empirical evidence for guiding green finance development and promoting sustainable green development.</p>