Ali, M., Seraj, M., Türüç, F., Tursoy, T., & Raza, A. (2023). Do banking sector development, economic growth, and clean energy consumption scale up green finance investment for a sustainable environment in South Asia: evidence for newly developed RALS co-integration. Environmental Science and Pollution Research, 30(25), 67891-67906.
Researchers from the Banking and Finance Department at Near East University conducted a pioneering study to explore the pivotal role of the banking sector, economic growth, and clean energy consumption in stimulating green finance investments across South Asian nations. This comprehensive research, spanning from 2000 to 2020, delved into the interplay of factors impacting the acceleration of eco-conscious financial initiatives, employing advanced econometric methodologies.
The study, believed to be the first of its kind, embraced a multi-faceted approach, considering variables like banking sector development, economic growth, clean energy consumption, carbon emissions, foreign direct investment, remittances, inflation, and trade openness. By utilizing sophisticated techniques such as the Residual Augmented Least Squares—Engle and Granger (RALS-EG) co-integration and Quantile Autoregressive Distributed Lag (QARDL), the research uncovered compelling insights into the dynamics influencing green finance investments.
Key findings highlighted the positive roles played by various factors in fostering green finance initiatives in the long term. Notably, banking sector development, economic growth, clean energy consumption, foreign direct investment, remittances, and trade openness exhibited significant positive correlations with the attraction and scaling up of green finance. Conversely, inflation emerged as the only variable exerting a negative influence on green finance scaling in South Asian economies.
The study's conclusions present a roadmap for policymakers and stakeholders, advocating proactive measures to enhance green finance strategies in the region. Among the proposed recommendations, the establishment of Green Central Banking Departments (GCBD) is suggested to drive a transition toward a green financial system. Emphasizing the importance of environmental considerations in economic policies, the study encourages the incorporation of environmental factors into wider economic strategies.
Furthermore, it underscores the necessity for robust banking regulations, climate stress testing, and incentives for green technology adoption. Additionally, fostering a conducive environment for foreign direct investment and remittances to finance eco-friendly initiatives is highlighted as a crucial step towards sustainable development.
This study underscores the significance of aligning financial policies with environmental sustainability goals. It proposes a holistic approach integrating fintech, increased research, and development to further drive green finance investments, contributing to a greener and more sustainable future.
For further details, access the original paper from the publisher's link:
https://link.springer.com/article/10.1007/s11356-023-27023-z
