ADVANCING SUSTAINABLE DEVELOPMENT THROUGH GREEN FINANCE: MECHANISMS, INNOVATIONS, AND POLICY IMPLICATIONS
Keywords:
Green finance, Sustainable development, ESG investments, Impact investing, Policy innovationAbstract
The global transition towards sustainable development necessitates a profound transformation in financial systems to support environmentally responsible and socially inclusive growth. Green finance, encompassing investments and financial products aimed at promoting environmental sustainability, has emerged as a pivotal instrument in achieving the objectives of the United Nations Sustainable Development Goals (SDGs) and the Paris Agreement on Climate Change. This paper explores the dynamic relationship between green finance and sustainable development, addressing the mechanisms through which financial innovation, regulatory frameworks, and stakeholder collaboration can accelerate progress towards a green economy. The escalating environmental challenges of climate change, resource depletion, and biodiversity loss necessitate innovative approaches to sustainable development. Green finance emerges as a critical mechanism to align economic growth with ecological stewardship by channeling financial resources into environmentally sustainable initiatives. This paper explores the transformative potential of green finance through an analysis of its mechanisms, innovations, and policy implications. It examines global trends, regional dynamics in Europe, and emerging practices in North Macedonia, offering insights into how green finance can mitigate environmental degradation while fostering economic resilience and social equity. Key instruments such as green bonds, ESG investments, and public private partnerships are highlighted as catalysts for achieving the Sustainable Development Goals (SDGs) and the objectives of the Paris Agreement. The study also addresses critical challenges, including scalability, inclusivity, and regulatory standardization, advocating for enhanced transparency, global cooperation, and innovative policy frameworks to unlock the full potential of green finance. Through a comprehensive synthesis of practices and trends, the paper provides actionable recommendations for policymakers, investors, and stakeholders, underscoring green finance's indispensable role in advancing sustainable development globally.
References
Agrawal, R., Agrawal, S., Samadhiya, A., Kumar, A., & Jain, V. (2024). Adoption of green finance and green innovation for achieving circularity: An exploratory review and future directions. Geoscience Frontiers, 15(4) (101669). https://doi.org/10.1016/j.gsf.2023.101669
Barber, B. M., Morse, A., & Yasuda, A. (2020). Impact investing. Journal of Financial Economics, 139(1), 162-185. https://doi.org/10.1016/j.jfineco.2020.07.008
Chen, M., Song, L., Zhu, X., Zhu, Y., & Liu, C. (2023). Does green finance promote the green transformation of China’s manufacturing industry? Sustainability, 15, 6614. https://doi.org/10.3390/su15086614
Chenet, H., Ryan-Collins, J., & van Lerven, F. (2021). Finance, climate-change, and radical uncertainty: Towards a precautionary approach to financial policy. Ecological Economics, 183, 106957. https://doi.org/10.1016/j.ecolecon.2021.106957
Dyck, A., Lins, K. V., Roth, L., & Wagner, H. F. (2019). Do institutional investors drive corporate social responsibility? Journal of Financial Economics, 131, 693–714. https://doi.org/10.1016/j.jfineco.2018.08.013
Edmans, A., & Kacperczyk, M. (2022). Sustainable finance. Review of Finance, 26(6), 1309-1313. https://doi.org/10.1093/rof/rfac069
Flammer, C. (2021). Corporate green bonds. Journal of Financial Economics, 142(2), 499-516. https://doi.org/10.1016/j.jfineco.2021.01.010
Fu, C., Lu, L., & Pirabi, M. (2023). Advancing green finance: A review of sustainable development. Digital Economy and Sustainable Development, 1(20). https://doi.org/10.1007/s44265-023-00020-3
Fu, W., & Irfan, M. (2022). Does green financing develop a cleaner environment for environmental sustainability: Empirical insights from ASEAN economies. Frontiers in Psychology, 13(904768). https://doi.org/10.3389/fpsyg.2022.904768
Goel, R., Gautam, D., & Natalucci, F. (2022). Sustainable finance in emerging markets: Evolution, challenges, and policy priorities. IMF Working Paper, WP/22/182.
Hong, H., Karolyi, G. A., & Scheinkman, J. A. (2020). Climate finance. The Review of Financial Studies, 33(3), 1011–1023. https://doi.org/10.1093/rfs/hhz146
Houston, J. F., & Shan, H. (2021). Corporate ESG profiles and banking relationships. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.3331617
Khan, S., Akbar, A., Nasim, I., Hedvičáková, M., & Bashir, F. (2022). Green finance development and environmental sustainability: A panel data analysis. Frontiers in Environmental Science, 10, 1039705. https://doi.org/10.3389/fenvs.2022.1039705
Kong, F. (2022). A better understanding of the role of new energy and green finance to help achieve carbon neutrality goals. Science Progress, 105(1), 1–23. https://doi.org/10.1177/00368504221086361
Liu, L., & Li, X. (2024). A study on the impact of green finance on the high-quality economic development of Beijing–Tianjin–Hebei Region. Sustainability, 16(2433). https://doi.org/10.3390/su16062433
Mahat, T. J., Bláha, L., Uprety, B., & Bittner, M. (2019). Climate finance and green growth: Reconsidering climate-related institutions, investments, and priorities in Nepal. Environmental Science Europe, 31(46). https://doi.org/10.1186/s12302-019-0222-0
Palmaccio, M., Galeone, G., & Shini, M. (2023). Green finance: Past, present, and future studies. Journal of Financial Management, Markets, and Institutions, 11(2). https://doi.org/10.1142/S2282717X23500135
Pástor, Ľ., Stambaugh, R. F., & Taylor, L. A. (2021). Sustainable investing in equilibrium. Journal of Financial Economics. https://doi.org/10.1016/j.jfineco.2020.12.011
Pedersen, L. H., Fitzgibbons, S., & Pomorski, L. (2021). Responsible investing: The ESG-efficient frontier. Journal of Financial Economics, 142(572–597). https://doi.org/10.1016/j.jfineco.2020.11.001
Rasoulinezhad, E., & Taghizadeh-Hesary, F. (2022). Role of green finance in improving energy efficiency and renewable energy development. Energy Efficiency, 15. https://doi.org/10.1007/s12053-022-10021-4
Schumacher, K., Chenet, H., & Volz, U. (2020). Sustainable finance in Japan. Journal of Sustainable Finance & Investment, 10(2), 213-246. https://doi.org/10.1080/20430795.2020.1735219
Xia, L., Liu, Y., & Yang, X. (2023). The response of green finance toward the sustainable environment: The role of renewable energy development and institutional quality. Environmental Science and Pollution Research, 30, 59249-59261. https://doi.org/10.1007/s11356-023-26430-6
Zheng, M., Feng, G.-F., & Chang, C.-P. (2023). Is green finance capable of promoting renewable energy technology? Empirical investigation for 64 economies worldwide. Oeconomia Copernicana, 14(2), 483–510. https://doi.org/10.24136/oc.2023.013
