Green finance and environmental sustainability in asean countries: The role of environmental innovation and fintech

Abstract

Green finance (GF) has emerged as a vital instrument for sustainable development in the face of extreme global climate change. The El Niño phenomenon exacerbated extreme weather in 2024, which saw a 1.54°C increase in global temperatures over pre-industrial levels, as reported by the World Meteorological Organization (2024). Meanwhile, approximately 75% of greenhouse gas emissions are derived from fossil fuels, which have harmful consequences for the global biosphere. By directing investments toward renewable energy, reducing reliance on fossil fuels and mitigating the effect of climate change, GF plays an important role. This study looks at how GF affects environmentally sustainable growth in six ASEAN nations: the Philippines, Vietnam, Singapore, Malaysia, Indonesia, and Thailand, between 2000 and 2023. It focuses on the regulatory impact of financial technology and laws, as well as the mediating function of Environmental Innovation (EI) in the relationship between environmental sustainability and GF. The study’s findings, according to Hayes Process Macro method, show that GF significantly contributes to sustainable development through lowering CO2 emissions and EF (H1). EI is a key mediating factor, enhancing GF’s effectiveness (H2). Financial technology positively regulates the direct impact of GF on EI and its indirect effect on sustainability (H3). In contrast, strict Environmental Policy (EP) negatively impact the effectiveness of GF in promoting innovation, reducing its positive influence on sustainable development (H4). Notably, no synergistic effect between financial technology and EP was found (H5). Drawing from these conclusions, the report outlines recommendations for fostering sustainable growth, such as enhancing financial technology and implementing a balanced environmental tax framework, ensuring a sustainable future in line with GF priorities