["International Journal of Finance &Economics, EarlyView. ", "\nABSTRACT\nSustainable finance is vital for long‐term corporate development, yet evidence on whether responsibility‐oriented capital allocation genuinely promotes green innovation remains limited. This paper examines the impact of bank ESG preferences on firms' green innovation. Based on loan portfolio ESG scores, we classify banks into ESG‐preference banks (ESGBs) and non‐ESG‐preference banks (NESGBs). Our findings demonstrate that firms borrowing from ESGBs exhibit significantly higher green innovation output, particularly in substantive green invention patents. Mechanism analysis indicates that ESGBs drive innovation by reducing financing costs, enhancing managerial environmental awareness, and promoting green investment, whereas NESGBs merely extend loan maturities without achieving environmental benefits. These effects are stronger in firms with environmentally experienced executives, greater financial access, or weaker environmental regulation. Further analysis supports the value‐driven lending motive and demonstrates that ESGBs primarily incentivize source control green technologies and deliver tangible emission reduction benefits. This study provides important implications for sustainable finance design.\n"]