Finance has the potential to regulate modes of production and consumption, and helps China achieve carbon peak and carbon neutralization. This paper uses the Toda–Yamamoto test and the extended Fourier Toda–Yamamoto test to explore the relationship between financial development and environmental quality in 31 provinces and municipalities in China during the period 2000–2018. We find that financial development in certain regions has effectively reduced the concentration of PM2.5, which indicates that it has a significantly positive effect on environmental quality, though with regional differences. After considering structural shifts, the relationship between financial development and environmental improvement is found to be significant in more regions, indicating that China has undergone structural shifts in these aspects. The aforementioned conclusions are also supported by further robustness tests. China can consequently utilise the positive impact of finance for advocating carbon emission reduction and improving environment quality, therefor contributing to the response to global climate change.