Leveraging BITs and institutional quality for sustainable development: The moderating role of climate-related development finance

Haithem Awijen, Thuy Dao and Hachmi Ben Ameur

Research in International Business and Finance, 2025, vol. 77, issue PB

Abstract: This study investigates the interplay between bilateral investment treaties (BITs), institutional quality, and climate-related development finance (CRDF) in fostering sustainable development. Using a dataset covering 35 countries from 1990 to 2022, we employ static fixed-effects models to analyze the impact of BITs and CRDF on four sustainability metrics: the gross savings rate (GrossSR), genuine savings rate (GenSR), CO2 emissions, and resource depletion. Our findings indicate that BITs generally enhance the GrossSR and GenSR, particularly in the presence of robust institutional frameworks. CRDF consistently shows a negative association with CO2 emissions and resource depletion, emphasizing its role in mitigating environmental degradation. The interaction terms reveal that the effectiveness of BITs in promoting sustainability is significantly moderated by institutional quality, highlighting the necessity of considering broader institutional contexts in policy formulation. These results underscore the complex dynamics between foreign investment, institutional quality, and environmental sustainability, providing crucial insights for policymakers in developing economies.

Keywords: Institutional quality; Green finance; Environmental sustainability (search for similar items in EconPapers)
JEL-codes: O43 P48 Q01 Q56 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:77:y:2025:i:pb:s0275531925001679

DOI: 10.1016/j.ribaf.2025.102911

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