Green Finance and Sustainable Development Nexus in Sub-Saharan Africa

Abstract

This study comprehensively assesses the influence of green finance on sustainabledevelopment in sub-Saharan African countries from 1999-2023. The sub-Saharan Africancountries are considered most vulnerable to climate change due to their individual countries’ geographical location, economic structure, population density, limited adaptive capacitytoclimate change, and social vulnerability. By examining the intricate linkages between greenfinance measured by financial development indicators, and institutional frameworks, technology, urbanization, and educational levels, the study aims to address environmental, social, and economic challenges and the trajectory of green development in sub-SaharanAfrican countries. The pool mean group autoregressive distributed lags (PMG/ARDL) method was employed for its ability to rheostat endogeneity and serial autocorrelation, neglected by previous studies. The findings underscore the pivotal role of green finance, proxied by bank credit to the private sector, in promoting sustainable practices, throughtechnological advancements and educational levels to increase investment in industries that prioritize sustainability, conservation, and biodiversity preservation. The negative nexusbetween foreign direct investment and the potential adverse consequences is associatedwiththe influx of multinational corporations to sub-Saharan African countries, particularly duetolax environmental regulations linked to weak regulatory frameworks. In light of thesefindings, this study recommends aligning investments with sustainable development goals, enhancing regulatory oversight to improve environmental quality, and balancing economicgrowth and environmental stewardship through sustainable development strategies, giventheir countries' vulnerability to climate change.