The Role of Green Financing in Advancing Sustainable Development European Insights from 2010-2023

Abstract

This study explores the relationship between green finance—measured through green bond issuance—and sustainable development in six EU countries (Sweden, Germany, France, Spain, Italy, and Poland) from 2010 to 2023. Using panel data regression with the Random Effects model, the analysis assesses the impact of green bond issuance, renewable energy capacity, and renewable energy production on CO₂ emissions. Findings reveal that neither green bond issuance nor renewable energy capacity significantly reduce CO₂ emissions, while renewable energy production is unexpectedly associated with increased emissions, possibly due to rising overall energy demand. These results suggest that green bonds alone are insufficient for achieving measurable environmental improvements without complementary policies. The study emphasizes the need for stronger environmental frameworks, strategic use of green bond proceeds, improved transparency and reporting, energy demand management, and integration of green finance within broader sustainability and macroeconomic strategies