How does green finance mitigate environmental degradation?

Abstract

This study examined the impact of green finance on environmental degradation through reducing CO2 emissions and ecological footprint in 57 countries during the period from 2012 to 2021. Instead of only using CO2 emissions as a measurement for environmental degradation, this research utilized ecological footprint as another measurement. By using GMM estimator, our research found that green finance could mitigate environmental degradation by decreasing CO2 emissions and ecological footprint. Noticeably, trade openness and population have a negative effect on ecological footprint. Moreover, it is discovered that the effect of green finance on environmental degradation in developed, European, and American countries is larger than developing, Asia – Africa – Oceania countries. These findings are expected to make an outstanding contribution to the development of green finance in various nations, and recommend several policy implications including green credit or green bond for businesses in order to mitigate environmental degradation.