Green Finance and Sustainable Development Nexus in Sub-Saharan Africa

Abstract

The present investigation comprehensively assesses green finance and sustainable development in sub-Saharan African countries from 1999-20203. Green finance proxied by financial indicators and sustainable development by environmental quality. This study examines the intricate linkages between financial development indicators, institutional frameworks, technology, urbanization, and educational levels in shaping the trajectory of green development. The pool mean group autoregressive distributed lags (PMG/ARDL) method was employed for its ability to rheostat endogeneity and serial autocorrelation, neglected by previous studies. The findings underscore the pivotal role of green finance, proxied by bank credit to the private sector, in promoting sustainable practices, through technological advancements and educational levels to increase investment in industries that prioritize sustainability, conservation, and biodiversity preservation. The negative nexus between FDI and the potential adverse consequences is associated with the influx of multinational corporations to sub-Saharan African countries, particularly due to lax environmental regulations linked to weak regulatory frameworks. In light of these findings, this study recommends aligning investments with sustainable development goals, enhancing regulatory oversight to improve environmental quality, and balancing economic growth and environmental stewardship through sustainable development strategies, given their countries' vulnerability to climate change.