IDEAS home Printed from https://ideas.repec.org/a/eee/jrpoli/v81y2023ics030142072300079x.html
   My bibliography  Save this article

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

Author

Listed:
  • Hunjra, Ahmed Imran
  • Hassan, M. Kabir
  • Zaied, Younes Ben
  • Managi, Shunsuke

Abstract

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.

Suggested Citation

  • Hunjra, Ahmed Imran & Hassan, M. Kabir & Zaied, Younes Ben & Managi, Shunsuke, 2023. "Nexus between green finance, environmental degradation, and sustainable development: Evidence from developing countries," Resources Policy, Elsevier, vol. 81(C).
    • Handle: RePEc:eee:jrpoli:v:81:y:2023:i:c:s030142072300079x
    DOI: 10.1016/j.resourpol.2023.103371
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S030142072300079X
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.resourpol.2023.103371?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Lionel Nesta & Francesco Vona & Francesco Nicolli, 2012. "Environmental Policies, Product Market Regulation and Innovation in Renewable Energy," Working Papers 2012.90, Fondazione Eni Enrico Mattei.
    2. Rongyan Liu & Deqing Wang & Li Zhang & Lihong Zhang, 2019. "Can green financial development promote regional ecological efficiency? A case study of China," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 95(1), pages 325-341, January.
    3. Warwick J McKibbin & Adele C Morris & Peter J Wilcoxen & Augustus J Panton, 2020. "Climate change and monetary policy: issues for policy design and modelling," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 36(3), pages 579-603.
    4. Naoyuki Yoshino & Ehsan Rasoulinezhad & Farhad Taghizadeh-Hesary, 2021. "Economic Impacts of Carbon Tax in a General Equilibrium Framework: Empirical Study of Japan," Journal of Environmental Assessment Policy and Management (JEAPM), World Scientific Publishing Co. Pte. Ltd., vol. 23(01n02), pages 1-25, June.
    5. Manel Kamoun & Ines Abdelkafi & Abdelfetah Ghorbel, 2019. "The Impact of Renewable Energy on Sustainable Growth: Evidence from a Panel of OECD Countries," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 10(1), pages 221-237, March.
    6. Volz, Ulrich, 2018. "Fostering Green Finance for Sustainable Development in Asia," ADBI Working Papers 814, Asian Development Bank Institute.
    7. Farhad Taghizadeh-Hesary & Naoyuki Yoshino, 2020. "Sustainable Solutions for Green Financing and Investment in Renewable Energy Projects," Energies, MDPI, vol. 13(4), pages 1-18, February.
    8. Nesta, Lionel & Vona, Francesco & Nicolli, Francesco, 2014. "Environmental policies, competition and innovation in renewable energy," Journal of Environmental Economics and Management, Elsevier, vol. 67(3), pages 396-411.
    9. Olatunji Abdul Shobande & Joseph Onuche Enemona, 2021. "A Multivariate VAR Model for Evaluating Sustainable Finance and Natural Resource Curse in West Africa: Evidence from Nigeria and Ghana," Sustainability, MDPI, vol. 13(5), pages 1-15, March.
    10. Lee, Chi-Chuan & Lee, Chien-Chiang, 2022. "How does green finance affect green total factor productivity? Evidence from China," Energy Economics, Elsevier, vol. 107(C).
    11. Muhammad Wasif Zafar & Muhammad Mansoor Saleem & Mehmet Akif Destek & Abdullah Emre Caglar, 2022. "The dynamic linkage between remittances, export diversification, education, renewable energy consumption, economic growth, and CO2 emissions in top remittance‐receiving countries," Sustainable Development, John Wiley & Sons, Ltd., vol. 30(1), pages 165-175, February.
    12. Azam, Muhammad & Younes, Ben Zaied & Hunjra, Ahmed Imran & Hussain, Nazim, 2022. "Integrated Spatial-Temporal decomposition analysis for life cycle assessment of carbon emission intensity change in various regions of China," Resources Policy, Elsevier, vol. 79(C).
    13. Arora, Jagriti & Chakraborty, Madhumita, 2021. "Does the ease of reading of financial disclosures influence investment decision?," Economics Letters, Elsevier, vol. 204(C).
    14. Hunjra, Ahmed Imran & Azam, Muhammad & Bruna, Maria Giuseppina & Taskin, Dilvin, 2022. "Role of financial development for sustainable economic development in low middle income countries," Finance Research Letters, Elsevier, vol. 47(PB).
    15. Torras, Mariano & Boyce, James K., 1998. "Income, inequality, and pollution: a reassessment of the environmental Kuznets Curve," Ecological Economics, Elsevier, vol. 25(2), pages 147-160, May.
    16. Greasley, David & Hanley, Nick & Kunnas, Jan & McLaughlin, Eoin & Oxley, Les & Warde, Paul, 2014. "Testing genuine savings as a forward-looking indicator of future well-being over the (very) long-run," Journal of Environmental Economics and Management, Elsevier, vol. 67(2), pages 171-188.
    17. Béchir Ben Lahouel & Younes Ben Zaied & Guo-liang Yang & Maria-Giuseppina Bruna & Yaoyao Song, 2022. "A non-parametric decomposition of the environmental performance-income relationship: evidence from a non-linear model," Annals of Operations Research, Springer, vol. 313(1), pages 525-558, June.
    18. Kim, Dong-Hyeon & Wu, Yi-Chen & Lin, Shu-Chin, 2020. "Carbon dioxide emissions and the finance curse," Energy Economics, Elsevier, vol. 88(C).
    19. Nidhaleddine Ben Cheikh & Younes Ben Zaied, 2021. "A new look at carbon dioxide emissions in MENA countries," Climatic Change, Springer, vol. 166(3), pages 1-22, June.
    20. Berensmann, Kathrin & Lindenberg, Nannette, 2016. "Green finance: actors, challenges and policy recommendations," Briefing Papers 23/2016, German Institute of Development and Sustainability (IDOS).
    21. Abdul Rehman & Hengyun Ma & Ilhan Ozturk & Muntasir Murshed & Vishal Dagar, 2021. "The dynamic impacts of CO2 emissions from different sources on Pakistan’s economic progress: a roadmap to sustainable development," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 23(12), pages 17857-17880, December.
    22. Galeotti, Marzio & Lanza, Alessandro & Pauli, Francesco, 2006. "Reassessing the environmental Kuznets curve for CO2 emissions: A robustness exercise," Ecological Economics, Elsevier, vol. 57(1), pages 152-163, April.
    23. Ntarmah, Albert Henry & Kong, Yusheng & Cobbinah, Eric & Gyan, Michael Kobina & Manu, Emmanuel Kwaku, 2020. "Analysis of the Responsiveness of Environmental Sustainability to Non-Performing Loans in Africa," Asian Journal of Applied Economics/ Applied Economics Journal, Kasetsart University, Faculty of Economics, Center for Applied Economic Research, vol. 27(2), pages 77-109, December.
    24. Conceição Castro & Cristina Lopes, 2022. "Digital Government and Sustainable Development," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 13(2), pages 880-903, June.
    25. Muhammad Ramzan & Bin Sheng & Muhammad Shahbaz & Jian Song & Zhilun Jiao, 2019. "Impact of trade openness on GDP growth: Does TFP matter?," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 28(8), pages 960-995, November.
    26. Ben Lahouel, Béchir & Taleb, Lotfi & Ben Zaied, Younes & Managi, Shunsuke, 2021. "Does ICT change the relationship between total factor productivity and CO2 emissions? Evidence based on a nonlinear model," Energy Economics, Elsevier, vol. 101(C).
    27. Naqvi, Bushra & Mirza, Nawazish & Rizvi, Syed Kumail Abbas & Porada-Rochoń, Małgorzata & Itani, Rania, 2021. "Is there a green fund premium? Evidence from twenty seven emerging markets," Global Finance Journal, Elsevier, vol. 50(C).
    28. Tao Peng & Hongwei Deng, 2021. "Research on the sustainable development process of low-carbon pilot cities: the case study of Guiyang, a low-carbon pilot city in south-west China," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 23(2), pages 2382-2403, February.
    29. James R. Crotty, 1990. "Owner–Manager Conflict and Financial Theories of Investment Instability: A Critical Assessment of Keynes, Tobin, and Minsky," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 12(4), pages 519-542, July.
    30. Dinda, Soumyananda, 2004. "Environmental Kuznets Curve Hypothesis: A Survey," Ecological Economics, Elsevier, vol. 49(4), pages 431-455, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Guoyong Wu & Jianwei Cheng & Fan Yang & Gaozhe Chen, 2024. "Can green finance policy promote ecosystem product value realization? Evidence from a quasi-natural experiment in China," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-18, December.
    2. Zongrun Wang & Lili Yang & Xiaohang Ren & Duong Phuong Thao Pham, 2023. "Facilitate or Inhibit: Corporate Environmental Performance and Financing Costs," Evaluation Review, , vol. 47(4), pages 727-759, August.
    3. Yueqi Yu & Zhouzhou Lin & Dongxia Liu & Yuning Hou, 2024. "Exploring the spatially heterogeneous impacts of industrial agglomeration on regional sustainable development capability: evidence from new energy industries," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 26(7), pages 16657-16682, July.
    4. Yangjie Liao & Xiaokun Zhou, 2023. "Can Digital Finance Contribute to Agricultural Carbon Reduction? Evidence from China," Sustainability, MDPI, vol. 15(22), pages 1-20, November.
    5. Zhang, Yingying & Wang, Xinpeng & Feng, Nianqiao, 2024. "The path of green finance to promote the realization of low-carbon economic transformation under the carbon peaking and carbon neutrality goals: Theoretical model and empirical analysis," International Review of Financial Analysis, Elsevier, vol. 94(C).
    6. Liu, Guohua & Zhao, Lihua & Wang, Xiaoyan & liao, Meihui, 2024. "Impact of social welfare finance on institutional financial performance: Cross-country evidence," Research in International Business and Finance, Elsevier, vol. 70(PB).
    7. Wenqing Zhang & Jingrong Dong, 2023. "The Polarization Effect and Mechanism of China’s Green Finance Policy on Green Technology Innovation," Sustainability, MDPI, vol. 15(13), pages 1-26, June.
    8. Wu, Guoyong & Gao, Yue & Feng, Yanchao, 2023. "Assessing the environmental effects of the supporting policies for mineral resource-exhausted cities in China," Resources Policy, Elsevier, vol. 85(PB).
    9. Xu, Jiaqi & Xu, Xiaowan & Jia, Gujiang, 2024. "Resource efficiency, green development, and social security: Evidence from ASEAN+6 economies," Resources Policy, Elsevier, vol. 90(C).
    10. Zhang, Shaohui & Chen, Kenjie, 2023. "Green finance and ecological footprints: Natural resources perspective of China’s growing economy," Resources Policy, Elsevier, vol. 85(PB).
    11. Xuanyan Le & Xuhui Ding & Jize Zhang & Li Zhao, 2024. "Has Green Finance Enhanced the Ecological Resilience Level in the Yangtze River Economic Belt?," Sustainability, MDPI, vol. 16(7), pages 1-19, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Licong Xing & Bisharat Hussain Chang & Salem Hamad Aldawsari, 2024. "Green Finance Mechanisms for Sustainable Development: Evidence from Panel Data," Sustainability, MDPI, vol. 16(22), pages 1-21, November.
    2. Lee, Chien-Chiang & He, Zhi-Wen & Xiao, Fu, 2022. "How does information and communication technology affect renewable energy technology innovation? International evidence," Renewable Energy, Elsevier, vol. 200(C), pages 546-557.
    3. Xu, Baochang & Li, Sihui & Afzal, Ayesha & Mirza, Nawazish & Zhang, Meng, 2022. "The impact of financial development on environmental sustainability: A European perspective," Resources Policy, Elsevier, vol. 78(C).
    4. Wang, Kai-Hua & Zhao, Yan-Xin & Jiang, Cui-Feng & Li, Zheng-Zheng, 2022. "Does green finance inspire sustainable development? Evidence from a global perspective," Economic Analysis and Policy, Elsevier, vol. 75(C), pages 412-426.
    5. Aldieri, Luigi & Bruno, Bruna & Makkonen, Teemu & Vinci, Concetto Paolo, 2023. "Environmental innovations, geographically mediated knowledge spillovers, economic and environmental performance," Resources Policy, Elsevier, vol. 81(C).
    6. Martin Neve & Bertrand Hamaide, 2017. "Environmental Kuznets Curve with Adjusted Net Savings as a Trade-Off Between Environment and Development," Australian Economic Papers, Wiley Blackwell, vol. 56(1), pages 39-58, March.
    7. Wenhao Song & Chunhui Ye & Yuheng Liu & Weisong Cheng, 2021. "Do China’s Urban–Environmental Quality and Economic Growth Conform to the Environmental Kuznets Curve?," IJERPH, MDPI, vol. 18(24), pages 1-15, December.
    8. Bennedsen, Mikkel & Hillebrand, Eric & Jensen, Sebastian, 2023. "A neural network approach to the environmental Kuznets curve," Energy Economics, Elsevier, vol. 126(C).
    9. Tetsuya Tsurumi & Shunsuke Managi, 2010. "Decomposition of the environmental Kuznets curve: scale, technique, and composition effects," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 11(1), pages 19-36, February.
    10. Savona, Maria & Ciarli, Tommaso, 2019. "Structural Changes and Sustainability. A Selected Review of the Empirical Evidence," Ecological Economics, Elsevier, vol. 159(C), pages 244-260.
    11. Yashar Tarverdi, 2018. "Aspects of Governance and $$\hbox {CO}_2$$ CO 2 Emissions: A Non-linear Panel Data Analysis," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 69(1), pages 167-194, January.
    12. Aslanidis, Nektarios, 2009. "Environmental Kuznets Curves for Carbon Emissions: A Critical Survey," Working Papers 2072/15847, Universitat Rovira i Virgili, Department of Economics.
    13. Lee, Chien-Chiang & Chiu, Yi-Bin & Sun, Chia-Hung, 2010. "The environmental Kuznets curve hypothesis for water pollution: Do regions matter?," Energy Policy, Elsevier, vol. 38(1), pages 12-23, January.
    14. Mikkel Bennedsen & Eric Hillebrand & Sebastian Jensen, 2022. "A Neural Network Approach to the Environmental Kuznets Curve," CREATES Research Papers 2022-09, Department of Economics and Business Economics, Aarhus University.
    15. Goher-Ur-Rehman Mir & Servaas Storm, 2016. "Carbon Emissions and Economic Growth: Production-based versus Consumption-based Evidence on Decoupling," Working Papers Series 41, Institute for New Economic Thinking.
    16. Lisa Gianmoena & Vicente Rios, 2018. "The Determinants of CO2 Emissions Differentials with Cross-Country Interaction Effects: A Dynamic Spatial Panel Data Bayesian Model Averaging Approach," Discussion Papers 2018/234, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    17. Dong-Hyeon Kim & Yi-Chen Wu & Shu-Chin Lin, 2022. "Carbon dioxide emissions, financial development and political institutions," Economic Change and Restructuring, Springer, vol. 55(2), pages 837-874, May.
    18. Aslanidis Nektarios, 2009. "Environmental Kuznets curves for carbon emissions: A critical survey," wp.comunite 0051, Department of Communication, University of Teramo.
    19. Marzio Galeotti & Silvia Salini & Elena Verdolini, 2017. "Measuring Environmental Policy Stringency: Approaches, Validity, and Impact on Energy Efficiency," Development Working Papers 412, Centro Studi Luca d'Agliano, University of Milano.
    20. Hao, Yu & Wei, Yi-Ming, 2015. "When does the turning point in China's CO2 emissions occur? Results based on the Green Solow model," Environment and Development Economics, Cambridge University Press, vol. 20(6), pages 723-745, December.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jrpoli:v:81:y:2023:i:c:s030142072300079x. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/30467 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.