"Er sieht ein größeres Pferd als sie."
I think the following translation is also correct: He sees a horse bigger than it.
If the "it" was referring to an inanimate feminine object surely that would be correct?
What inanimate feminine object do you have in mind? I can't think of any that would make sense here.
"Die Stute" might work grammatically as a possible referent for 'sie'. But that's not good German. Duo's interpretation is by far the most natural one.
That's perfectly fine but notice that the sentence is ambiguous. The 'sie' could refer either to one of the mares or to a woman who sees the bigger mare. This latter interpretation is the more natural one (that is: without further context, of course). You can avoid the ambiguity by using a different pronoun, e.g. 'Er sieht eine größere Stute als diese'.
Let's say you're referring to two mares. Could you say "Er sieht eine größere Stute als sie" and if not, what would be the correct sentence?