Exploring the impact of Green Investment, Financial Development on Green Growth with CO2 Intensity as a Measure: Empirical evidence in some Asian countries

Abstract

This study examines the interplay between green investment, financial development, and green growth across Asian nations, contrasting developed economies (Japan, China, Singapore) with developing ones (Vietnam, Indonesia, India). Using carbon intensity as a key metric, the analysis is grounded in theoretical frameworks such as endogenous growth, the Environmental Kuznets Curve, and green growth principles. Employing regression analysis alongside an instrumental variable (IV) approach to address endogeneity, the research evaluates data from 2011–2022. Findings reveal that green investment significantly reduces CO₂ emission intensity. Intriguingly, while ordinary least squares (OLS) models indicate no direct effect of core financial development indicators—financial institution development (FID) and financial market development (FMD)—on emission levels, the IV analysis highlights FMD’s statistically significant role in developed economies. This suggests that financial systems’ environmental impact hinges on their alignment with green finance and sustainable investments. The results underscore the need for policies that harmonize financial development with green investment strategies to advance green growth objectives, offering critical insights for both developing and developed nations