Impact of Climate-Related Financial Policy on Sustainable Development

Abstract

This paper investigates the effectiveness of climate-related financial policies (CRFPs) in promoting sustainable development goals (SDGs). Using data from a sample of 71 countries between 2016 and 2021, we find robust evidence showing that CRFPs play a crucial role in assisting countries to achieve their sustainable development plans. However, the impact of CRFPs varies across different individual development goals. We find that CRFPs have the potential to foster food security, well-being, education quality, clean energy, innovation, decent work, innovation, equality, sustainable cities, marine life and peace. However, the CRFPs appear to hinder progress in responsible consumption and production as well as climate action. Our research further highlights the idea that institutional quality can act as a supporting mechanism to strengthen the positive impact of CRFPs on sustainable development in a country. Finally, we find that the implementation of CRFPs in advanced economies is more effective in promoting a country’s achievement of the SDGs. This study provides important policy implications of reinforcing institutional frameworks, fostering international partnerships and adopting holistic approaches that contribute to diverse facets of sustainable development.