Green finance and renewable energy: A worldwide evidence

Abstract

Using a large sample of 44 countries for 2007–2020, we provide evidence that green finance (green bonds) significantly fosters renewable energy production. Our results are robust to addressing cross-sectional dependence concerns, allowing structural breaks, and using several alternative specifications and estimation methods. Compared to our baseline findings, the effect is higher for green bonds issued to finance alternative energy. We also find that the existing stock of technological capacity significantly fosters the impact of green finance on renewable energy production, particularly in the long run. The long-run impact of green finance is significant in countries with higher emissions per dollar GDP, higher levels of climate change exposure to the economy and human life, and better-developed credit markets. The effect is more pronounced in countries with low or net zero emission targets and following the post-Paris 2015 agreements.