Infrastructure Financing Efficiency through Green Bonds: An ESG Performance Perspective on Emerging Markets

The global demand for sustainable infrastructure has intensified in emerging markets as a result of rapid urbanization and industrialization. Financing large-scale infrastructure projects, however, remains a significant challenge, as traditional funding sources often prove insufficient. Green bonds have emerged as a viable instrument to mobilize capital for environmentally sustainable projects. Nevertheless, the impact of green bonds on infrastructure financing efficiency (IFE), particularly in emerging markets characterized by less developed capital markets and inconsistent ESG data, remains inadequately understood. This study addresses this gap by investigating the effects of green bond issuance and ESG performance on IFE across twelve emerging economies from 2015 to 2024. Employing econometric models and mediation analysis, the research demonstrates that ESG performance acts as a mediator in the relationship between green bond issuance and financing efficiency. The analysis reveals that green bonds significantly enhance IFE in China and India, with China experiencing the most pronounced improvements due to its robust regulatory framework, while Brazil's fragmented institutional structure constrains the effectiveness of green bonds. The findings underscore the importance of a strong regulatory environment, consistent ESG disclosures, and institutional coherence in maximizing the benefits of green bonds. This research contributes to the literature by providing empirical evidence and offering practical guidance for policymakers, investors, and development banks seeking to improve infrastructure financing through ESG-aligned financial instruments.