Unlocking the role of green finance: How green bonds mitigate co2 emissions – implications for economic growth

Abstract

The study’s objectives are to elucidate the topic of green bonds’ impact on CO2 emissions, as well as to investigate how these effects change when considering a country’s level of Foreign Direct Investment (FDI), Board Gender Diversity (BGD) and Information and Communication Technology (ICT). Subsequently, CO2 emissions were investigated for their influence on the positive correlation between green bonds and economic growth following the conclusions from previous studies. With mostly gathered from the World Bank National Accounts and the Our World in Data, country-level statistics within this study cover 539 observations across 78 countries during the timeframe from 2014 to 2023. Using multiple linear regression models, our findings highlight that a rise in green bonds is favorably associated with reductions in CO2 emissions, which in turn promotes economic growth. Further analysis reveals that these effects are more pronounced for nations with high levels of BGD or ICT, but not in those with high FDI levels. Further robustness tests' findings indicate that their green bonds also have a positive impact on greenhouse gas emissions, with the effect being greater than that of green bonds on carbon emissions. Ultimately, the results underscore the green bonds’ potential as an effective financial instrument for combating climate change while fostering sustainable economic growth