Researchers from Near East University’s Department of Banking and Finance and Department of Economics delve into the pivotal role of green finance in mitigating climate change, addressing the investment shortfall in environmental initiatives. Their study aims to explore the link between investments in green finance and various facets, utilizing innovative methodologies like the “Residual Augmented Least Square” (RALS) cointegration technique and the “Quantile Autoregressive Distributed Lag” (QARDL) model for the period spanning from 1990 to 2020 across OECD-15 European countries.
The empirical findings using RALS cointegration confirm strong linkages among green finance investments, renewable energy consumption, carbon dioxide emissions, foreign direct investment, remittances, inflation, gross fixed capital formation, trade openness, and human capital. The QARDL model uncovers that several factors such as renewable energy consumption, foreign direct investment, gross fixed capital formation, trade openness, and human capital significantly influence green finance investments positively. Conversely, carbon dioxide emissions and inflation exhibit adverse associations, while remittances show negligible impact.
This research introduces novel methodologies to investigate the nuanced connections between green finance and its determinants, offering more reliable insights for policymakers and practitioners. It emphasizes the urgent need for OECD-15 European countries to develop robust policies to mitigate climate change risks and attract necessary investments into green finance. The outcomes underscore the imperative for European nations to prioritize funding initiatives that combat climate change and stimulate investments in sustainable green finance.
Furthermore, the study highlights that lagged green finance, foreign direct investment, and fixed capital formation serve as critical drivers for enhancing investments in green finance. This underscores the importance of attracting foreign investment and leveraging renewable energy to fuel green financing initiatives, forming a crucial pathway to address climate change challenges.
These findings are pivotal for policymakers, advocating the necessity of proactive measures to secure investments for green finance and implement strategies aimed at achieving Sustainable Development Goals (SDGs) by 2030. Strengthening green finance initiatives, attracting foreign investments, and prioritizing renewable energy deployment are essential for OECD-15 European countries to combat climate change effectively.
For further details, access the original paper from the publisher’s link:
https://link.springer.com/article/10.1007/s10668-023-03765-1
