Nexus between green finance, environmental degradation, and sustainable development: Evidence from developing countries

In this study, we aim to investigate the impact of green finance and environmental degradation on sustainable development in developing countries. We use a panel dataset for 42 developing countries for the 2000–2020 period employing the panel fixed effect estimation. Adjusted net savings are used to measure sustainable development, green credit, green securities, and green investments are applied as proxies for green finance, and carbon (CO₂) emissions are used to indicate environmental degradation. The analysis reveals that green finance has a positive and significant impact, whereas environmental degradation exerts a negative and significant impact on sustainable development in developing countries. Further, we find the same outcomes by employing the system-generalized method of moments estimation, confirming the robustness of our results. Our study has implications for regulators and policymakers seeking to achieve sustainable development in developing countries. Our findings will be useful for designing policies related to green financing and investment in developing nations.