This study aims to investigate the impact of green finance (GF) on environmental performance (EP). It further examines how country-level cultural dimensions such as uncertainty avoidance (UCA) and long-term orientation (LTO) interact with this relationship. In addition, the moderating role of sustainable development (SD) at the country level is also explored.
The study uses comprehensive measures of GF and EP for a sample of 44 countries across different global regions during 2016–2020. EP is proxied using a composite index of environmental degradation based on the consumption of non-renewable and natural resources, where lower degradation indicates better EP. The system generalized method of moments serves as the baseline estimation technique, while two-stage least squares with instrumental variables (IVs) is applied for robustness checks. An extended model incorporating CO2 emissions and a country-development dummy variable is also estimated for additional validation.
The results reveal a significant negative effect of GF on EP, indicating that higher levels of GF contribute to lower environmental degradation and, hence, improved EP. Furthermore, countries exhibiting higher UCA and LTO scores demonstrate stronger mobilization of GF toward reducing environmental degradation. The moderating analysis further shows that the negative association between GF and EP remains significant for countries with high levels of SD. It suggests that SD enhances the environmental benefits of GF, while it becomes insignificant for countries with lower levels of SD.
By using a comprehensive framework for measuring both GF and EP, this study makes a novel contribution by integrating Hofstede’s cultural dimensions, such as UCA and LTO, into the analysis of the GF–EP relationship across a global sample of 44 countries.
