Green finance and renewable energy growth in developing nations: A GMM analysis

Abstract

This research aims to examine the interrelationship between green finance and its influence on the renewable energy industry in a sample of 30 developing nations from 1990 to 2018. The main aim of this study is to investigate the interconnected effects between green bonds, investments in renewable energy, and carbon markets, with a specific emphasis on the influence of the banking system in shaping these interrelationships. To accomplish this objective, the Generalized Method of Moments (GMM) is utilized to examine the data and comprehend the intricate interrelationships among the variables. The emergence of green finance offers a favourable prospect for tackling environmental issues while concurrently fostering sustainable economic development. Nevertheless, the degree to which it impacts the adoption of renewable energy and carbon markets has yet to be thoroughly investigated, especially in developing nations. This study seeks to provide insights into the factors that influence the development of green finance and its implications for investments in renewable energy by examining a diverse group of 30 emerging countries. The findings of this research provide compelling revelations regarding the interdependence between green finance and its influence on the renewable energy industry. The results underscore the notable contribution of the banking sector in enabling the transfer of capital into sustainable energy initiatives via the utilization of green bonds. Furthermore, we have discovered dynamic spillover effects between green bonds, renewable energy investments, and carbon markets. These financial mechanisms have the potential to influence each other within the framework of sustainable development. A comprehensive comprehension of the complex interconnections among green finance, renewable energy, and carbon markets is imperative for policymakers, investors, and financial institutions seeking to promote sustainable practices and efficiently allocate resources. This research adds to the expanding corpus of literature on green finance and offers significant implications for advancing a more environmentally friendly and sustainable future in developing nations.