Financing the Green Future: Moderating Role of Climate-Related Financial Policies in Analyzing the Financial and Economic Determinants of Green Growth

Abstract

In a contemporary era, where the world is coping with issues like environmental degradation, resource depletion and the intensifying impact of climate change, aligning economic growth with environmental sustainability and attaining GGR is a crucial imperative. Developing nations are facing dual challenges of long-term economic growth while alleviating the adverse effects of resource depletion and the carbon intensive production processes. In this pursuit, the study investigates the impact of financial globalization, financial innovation, trade in low carbon technologies and hi tech industries on green growth with the moderating effect of climate related financial policies in BRICS countries using panel data from 2000-2020. Employing the system GMM model provided robust and consistent estimation while dealing with endogeneity and unobserved heterogeneity, while the Method of Moments Quantile Regression (MMQR) provided the heterogeneous impacts of these factors across varying quantiles of green growth. FMOLS and DOLS are applied as robustness tests. The results are consistent across all models and depict the real phenomena. Financial globalization and financial innovation significantly and negatively impact GGR, indicating the BRICS nations are still rely on conventional business models that target short-term growth strategies instead of long-term economic growth and sustainability. HT and trade in low carbon technologies have a positive effect on GGR in BRICS countries. The results for the interaction term (FGlob*CRFPI) and (Trlowcartech*CRFPI) are negative and significant, is an indication the CRFP are insufficiently stringent in BRICS nations, as financial flows may result in them being exploited for the relocation of carbon-intensive activities by developed countries and the non-alignment of CRFP with trade policies. However, the results of the other two interaction terms (FI*CRFPI), (HT*CRFPI) are positive and significant. The results provide important insights for policymakers regarding the need for targeted policies for x aligning business and industrial processes with the sustainability goals, support for low carbon trade and innovative hi-tech industries, robust climate related financial policies governance. These policies will facilitate the transition of BRICS countries towards environmentally resilient economies with sustainable economic growth.