Sensitivity of Green Finance to Environmental Sustainability

Abstract

This study investigates the impact of green finance on environmental sustainability across 136 countries spanning eight regions from 1960 to 2023. By employing robust regression models, including interaction terms to account for varying regional contexts, the research provides two key findings. First, green finance has a generally positive effect on environmental sustainability in the European Union and Western Europe, Eastern Europe and Central Asia, East Asia and the Pacific, North America, and South Asia. However, it shows a negative impact in Latin America and the Caribbean, the Middle East and North Africa, and Sub-Saharan Africa. Second, inflation moderates the effect of green finance on environmental sustainability, with its influence varying across different regions. This study contributes novel insights by revealing how green finance's effectiveness is contingent on regional economic conditions and inflationary pressures, offering a nuanced understanding of its role in promoting environmental sustainability globally.