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The Strategic Role of Sustainable Finance in Corporate Reputation: A Signaling Theory Perspective

Author

Listed:
  • Richard Arhinful

    (Faculty of Management, Multimedia University, Cyberjaya 63000, Selangor, Malaysia)

  • Leviticus Mensah

    (Department of Accounting and Finance, World Peace University, 035722 Nicosia, North Cyprus, Turkey)

  • Halkawt Ismail Mohammed Amin

    (Department of Accounting, Dukan Technical Institute, Sulaimani Polytechnic University, Sulaimani 46001, Kurdistan Region, Iraq)

  • Hayford Asare Obeng

    (Department of Business Administration, World Peace University, 035722 Nicosia, North Cyprus, Turkey)

  • Bright Akwasi Gyamfi

    (Faculty of Management, Multimedia University, Cyberjaya 63000, Selangor, Malaysia)

Abstract

The United Kingdom has long been a frontrunner in green finance, establishing programs like the Green Finance Institute to promote corporate engagement in sustainable initiatives. The Green Finance Strategy, enacted in 2019, aligns UK financial procedures with international standards, including the EU taxonomy for sustainable Activities. The study examined how sustainable finance enhances the corporate reputation of the firms listed on the London Stock Exchange. A purposive sampling yielded 17 years of data from 143 non-financial companies from the Thomson Reuters Eikon DataStream between 2007 and 2023. In dealing with the issue of endogeneity and auto-serial correlation, the Generalized Methods of Movement (GMM) was employed to provide reliable and unbiased estimation results. The study revealed a positive impact of green bond issues, environmental expenditures, and policies for emission reduction on corporate reputation. The moderating relationship between green bond issues, environmental expenditures, and board diversity revealed a positive and significant relationship with corporate reputation. Managers should ensure that their endorsed activities gain public recognition and align with sustainability goals, particularly by emphasizing the issuance of green bonds in their financing strategy. They should also collaborate with environmental experts and stakeholders to ensure that the outcomes of funded projects are evaluated in line with international ESG standards.

Suggested Citation

  • Richard Arhinful & Leviticus Mensah & Halkawt Ismail Mohammed Amin & Hayford Asare Obeng & Bright Akwasi Gyamfi, 2025. "The Strategic Role of Sustainable Finance in Corporate Reputation: A Signaling Theory Perspective," Sustainability, MDPI, vol. 17(11), pages 1-28, May.
    • Handle: RePEc:gam:jsusta:v:17:y:2025:i:11:p:5002-:d:1667557
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    2. Xiaoqing Li & Jingjing Deng, 2025. "How Green Finance Drives the Synergy of Pollution Reduction and Carbon Mitigation: Evidence from Chinese A-Share Firms," Sustainability, MDPI, vol. 17(18), pages 1-21, September.
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    4. Abdelnaser M. Mohamed Amer & Asil Azimli & Muri Wole Adedokun, 2025. "Earnings Management and IFRS Adoption Influence on Corporate Sustainability Performance: The Moderating Roles of Institutional Ownership and Board Independence," Sustainability, MDPI, vol. 17(17), pages 1-27, September.

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