Assessing Growth of Green Finance and Investment in Select Developed and Developing Countries

Sumedha Bhatnagar and Dipti Sharma

A chapter in The Finance-Innovation Nexus: Implications for Socio-Economic Development, 2024, vol. 34, pp 55-72 from Emerald Group Publishing Limited

Abstract: This study evaluates the performance of green finance and investment scenarios in 15 carbon emitting countries, among which 7 are developed countries and 8 are developing countries. The principal component analysis is applied to form the global green financing (GF) and investment index, a composite indicator for assessing the multidimensional characteristics of GF and investment. The global green finance and investment index is developed to map the country’s overall GF and investing scenario. The indicator is developed on the basis of 30 variables that represent 11 quantitative factors. These factors are aggregated into four parameters: transparency, efficiency, efficacy and resilience. Transparency includes political stability and the development of the countries’ capital markets to adapt to the green transition. Efficiency consists of the performance of existing resources and regulatory conditions of the countries. Efficacy refers to the factors related to international engagement and the growth of specific financial instruments. Lastly, resilience includes factors that promote the adaptability of the countries towards a green economy and green financial system. It contains the regulatory structure of the country’s growth of macroeconomic variables. These variables represent social, economic, environmental and governance factors that influence the countries’ GF and investment scenario. The countries are ranked on the basis of the composite indicator score. The USA scored the highest rank, and India scored the least. In terms of developed countries, the USA has achieved the highest value, followed by Germany and in developing countries, China has scored the highest performance, followed by Mexico.

Keywords: Green investment; green finance; green finance index; composite indicator; principal component analysis; O11; Q01; Q5 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eme:isetez:s1571-038620240000034005

DOI: 10.1108/S1571-038620240000034005

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