The impact of green finance funds on industrial productivity cycles: Evidence from developing economies

Abstract

This paper explores the impact of the Global Climate Finance Fund, including the Adaptation Finance Fund and Mitigation Finance Fund, on industrial productivity from 2000 to 2019 in 73 developing economies. The findings indicate that robust green finance positively affects industrial productivity in developing economies. In addition, it is found that green finance's positive effects on industrial productivity occur in the middle up to 0.70 quantiles. On the contrary, the magnitude turns negatively on the upper quantiles beyond 0.70. These findings indicated that the governments of developing economies should prioritize green projects over non-green projects to ensure sustainable development in the future. Indeed, developing economies should reform financial regulation to encourage bank and non-bank financial institutions to expand green financing in their credit portfolio.