This paper investigates the effect of the green credit policy (GCP) on green innovation in heavily polluting enterprises (HPEs) using the promulgation of the “Green Credit Guidelines” (2012 Guidelines) policy in China as a quasi-natural experiment. The findings show that the 2012 Guidelines have had a positive and significant effect on the green patent output of HPEs, especially HPEs under stronger financial constraints. Furthermore, this positive effect occurred predominantly in HPEs with higher expected sunk costs or noncompliance costs, more intense product market competition, and state ownership. These results suggest that the GCP can stimulate green innovation in HPEs by exerting credit constraints, thus achieving green transformation in an emerging economy. •Green credit policy improves green innovation in heavily polluting enterprises (HPEs)•Improving by exerting financial credit constraints on HPEs•Improvement occurs in HPEs with higher sunk or noncompliance costs•Improvement occurs in HPEs with more intense competition and state ownership•Evidence from a quasi-natural experiment in China