Innovation through Green Finance: a thematic review

Abstract

The race for economic development worldwide is being brought at the expense of the rapid depletion of natural resources and adverse environmental changes. This has brought our attention to the global urgency of climate change. To overcome this problem, drastic changes are required in our way of living, including consumption, transportation, and production. This requires green innovation flourished by finance (also known as green finance [GF]). Considering this, we conducted a thematic analysis of the previous strand of literature that presents evidence that finance supports green innovation in different phases of life. Our thematic analysis was threefold: 1) we explored the theoretical lens adopted by recent studies in exploring the causal effect of finance in promoting green innovation, 2) we identified the scope of these studies in terms of environmental outcomes covered by them, we called them research themes in this study, and 3) based on our thematic analysis, we highlighted areas needing greater attention by academicians and practitioners. We found that GF positively impacts the firm's green innovation. The main reason discussed in the literature is that the dedicated resource availability for green innovative projects helps to minimize the constraints on funds for innovative projects. One stream of literature also highlights the rise of greenwashing as managers only use these funds for publicity, however, they are not fully committed to sustainability goals. This review provides valuable suggestions to academicians and practitioners regarding effective financial resource usage to progress toward achieving sustainability goals.