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Towards net zero: Implications of environmental regulations on green finance

Author

Listed:
  • Al Mamun, Md
  • Boubaker, Sabri
  • Hassan, Md Zakir
  • Manita, Riadh

Abstract

The 2024 IPCC (Intergovernmental Panel on Climate Change) report highlights that financing is a major concern in achieving the net zero goal. This paper studies the impact of environmental regulations and policies adopted by countries in promoting green finance. Using a large sample of 42 countries, we show that environmental regulations and green finance policies significantly boost the size and issuance of green finance instruments both by corporate and government issuers. Moreover, these regulations and policies enhance the longevity and attractiveness of green bonds issued by various economic agents, both in the short and long run. The effect of environmental regulations and policies on green finance is particularly pronounced in countries with lower geopolitical risk, low energy security, and higher energy needs per dollar of GDP. Our results remain robust under the conditions of short-run heterogeneity, long-run homogeneity, and cross-sectional dependence in the sample.

Suggested Citation

  • Al Mamun, Md & Boubaker, Sabri & Hassan, Md Zakir & Manita, Riadh, 2025. "Towards net zero: Implications of environmental regulations on green finance," Finance Research Letters, Elsevier, vol. 79(C).
    • Handle: RePEc:eee:finlet:v:79:y:2025:i:c:s1544612325005628
    DOI: 10.1016/j.frl.2025.107299
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    More about this item

    Keywords

    Green finance; Financial markets; Energy security; Environmental regulations; Environmental behavior;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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