Role of renewable energy investment and geopolitical risk in green finance development: Empirical evidence from BRICS countries

Abstract

Global efforts are being made to achieve ecological sustainability while reducing the consequences of environmental degradation. We used panel data from Brazil, Russia, India, China, and South Africa (BRICS countries), spanning 2000 to 2020, to examine the interactions between economic growth, green financing, green credit, renewable energy investment, geopolitical risk (GPR), and environmental sustainability. To explore the short- and long-term connections between the series, we used the cross-sectional augmented distributed lag (CS-ARDL) econometric method. We found that increasing green financing, renewable energy investment, and energy innovation by 0.05% reduced environmental pollution. Moreover, GPR shocks have long-term beneficial effects on green finance development. We also found that the adoption of renewable energy in BRICS countries is significantly and favourably impacted by GPR. This study is groundbreaking because it is the first to examine the interplay between green financing, geopolitical risk, and environmental tax nexus in renewable energy investments, all of which play critical roles in achieving ecological sustainability and yield valuable insights for policymakers working towards the realization of sustainable development goals.