Does green finance really deliver what is expected? An empirical perspective

Abstract

Coupled with adopting the United Nations Sustainable Development Goals and the Paris Climate Agreement, the Asian Development Bank (ADB) role may not be overlooked. The ADB took substantial measures to ensure environmentally sustainable growth in Asia and the Pacific. They include climate change finance, that is a joint project of the ADB and the Global Environment Facility. One of its components is climate mitigation finance, which consists of the investment process that supplies funds to achieve environmental sustainability in the region. Considering the evolving role of green finance, this study quantifies green finance as “climate mitigation finance” and examines its impact on the ecological footprint across twenty-six economies in the Asian region. To do so, we use an ordinary least squares baseline model, followed by fixed-effects estimation. Our empirical findings show that green finance reduced the ecological footprints, and it appears environmentally friendly. From the Asian perspective, in particular, green finance delivers as anticipated. Moreover, the findings are robust to using alternative measures and estimation strategies, and they should motivate policymakers to continue investing in climate finance.