research topics on green finance

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• Published: 20 December 2023

Emerging new themes in green finance: a systematic literature review

• H. M. N. K. Mudalige   ORCID: orcid.org/0000-0002-4497-4750 1  

Future Business Journal volume  9 , Article number:  108 ( 2023 ) Cite this article

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There is a need for an extensive understanding of the emerging themes and trends within the domain of green finance, which is still evolving. By conducting a systematic literature review on green finance, the purpose of this study is to identify the emerging themes that have garnered significant attention over the past 12 years. In order to identify the emerging themes in green finance, bibliometric analysis was performed on 978 publications that were published between 2011 and 2023 and were taken from the databases of Scopus and Web of Science. The author examined annual scientific production, journal distribution, countries scientific production, most relevant authors, most frequent words, areas where empirical research is lacking, words' frequency over time, trend topics, and themes of green finance. The outcome of the review identified the following seven themes: (i) green finance and environmental sustainability; (ii) green finance and investments; (iii) green finance and innovation; (iv) green finance policy/green credit guidelines; (v) green finance and economy; (vi) green finance and corporate social responsibility; (vii)trends/challenges/barriers/awareness of green finance. The analysis of these emerging themes will contribute to the existing corpus of knowledge and provide valuable insights into the landscape of green finance as it evolves.

Introduction

Cities will face their greatest challenges ever during the next 30 years, and three-quarters of the world's population will reside in urban areas by 2050 due to the unparalleled rate of urbanization as a result of population growth, resource scarcity, such as peak oil, water shortages, and food security [ 100 ].

One of the main challenges in building and maintaining sustainable cities is discovering the sources required to fund vital infrastructure, development, and maintenance activities that have a sustainable future. To achieve the creation of sustainable cities, there is a need for green projects via green financial bonds, green banks, carbon market tools, other new financial instruments, new policies, fiscal policy, a green central bank, fintech, community-based green funds, and expanding the financing of investments that provide environmental benefits [ 26 , 78 ].

It is evident that green financing plays a crucial role in promoting sustainable initiatives. Thus, a transition from a rising economy to a green economy necessitates that a country's leadership offers green financing [ 112 ]. To assure green economic growth, nations around the world have invested in green projects to promote, invent, and employ environmentally friendly technologies to safeguard the environment and maximize environmental performance [ 55 ]. Because of new stakeholders' and institutions' understanding of environmental issues, regulatory authorities are likely to seek out extra ecologically acceptable financial resources. In an effort to establish environmental legitimacy, this type of environmental proactivity will be required when new methods of providing financial resources and green financing arise.

In numerous ways, the impact of adopting green financing is proven. First, green finance provides financial support for firms engaged in green innovation, including the purchase of green equipment, the introduction of new environmentally efficient technologies, and the training of their personnel. Second, green funding from various projects can assist stakeholders (organizations, governments, and regulators) in spending R&D funds on environmental challenges and minimize the associated risk with green legislation. Lastly, green policies have higher costs than conventional practices, and green finance can assist an organization in covering these expenses without encountering significant financial obstacles. As a result, green finance-driven economic growth can significantly support green policies, lessen environmental pollution, and build sustainable cities [ 128 ].

There have previously been systematic literature reviews conducted in the green finance area. However, a study's reliance on one database can exclude some recent developments in green finance from its analysis [ 93 ]. Findings from several databases could be compared and contrasted to create a more all-encompassing view of the area. Therefore, this study focuses on using Scopus and WoS databases.

Though additional methods, such as systematic literature reviews (SLR) and more complex network analyses such as co-occurrence of index terms, citations, co-citations, and bibliometric coupling, are available, previously conducted studies used a fundamental bibliometric technique [ 23 ]. A more detailed picture of the green finance study setting may emerge from an examination of the identification of various themes.

As part of a systematic review of the literature concerning emerging trends in green finance, it is critical to ascertain the dominant themes that are present in the field. By adopting this methodology, an intentional emphasis is placed on maintaining the review's relevance and excluding any studies that are obsolete. In addition, by identifying and classifying these themes, one can gain significant knowledge regarding the ever-changing characteristics of green finance, thereby illuminating the latest advancements and patterns. A study conducted by Pasupuleti and Ayyagari [ 99 ] identified different themes in green finance, but the researchers were only focused on polluting companies. By amalgamating insights from the literature review, one can attain a holistic comprehension of the current state of research in the field of green finance. Additionally, this process identifies areas where additional inquiry is necessary. Engaging in such an undertaking provides advantages not only to the scholarly community but also carries practical implications for policymakers, practitioners, and investors, assisting them in formulating effective policies and investment strategies and making well-informed decisions.

Green finance research is growing rapidly. However, the rising themes and trends in green finance literature must be comprehended. A comprehensive literature review can summarize current knowledge, identify research gaps, and identify the field's most relevant topics. This study seeks to uncover green finance's emerging themes through a rigorous literature review. This research aims to advance green finance knowledge by synthesizing and analyzing a wide range of scholarly articles.

Methods and methodology

Study selection process and methods.

In this study, a systematic literature review (SLR) was applied. It used inclusion criteria, analysis techniques, and a more objective method of article selection. As recommended for SLRs [ 65 ] with regard to the article selection process, the PRISMA article selection steps were adhered to. The steps are "identification," "screening," and "included". The steps that were taken in this study are shown in Fig.  1 .

PRISMA article selection flow diagram. Note : Search algorithm; “green finance” . Sources (s) Authors Construct, 2023

In the identification phase, the search terms, search criteria, databases, and data extraction technique are chosen. The keyword to use in the search was "green finance" as the study is aimed at identifying emerging themes in green finance.

The identified articles need to be screened in accordance with the PRISMA guidelines. The tasks carried out at the screening were the screening, retrieval, and evaluation of each article's eligibility. According to Priyashantha et al. in [ 103 ], articles in each task that did not meet the inclusion criteria were removed. The "empirical studies" published in "Journals" from "2011–2023" in "English" were the inclusion criteria for screening the articles. In 2023, up to May, the journal articles were chosen.

This screening was carried out both manually and automatically. Utilizing Scopus' and Web of Science's (WoS) automatic article screening features by study type, language, report type, and publication date, articles achieving the inclusion criteria "empirical studies" published in "English" "journals" from "2011–2023″ were included. The other publication types such as conference papers, book chapters, reviews, research notes, editor's comments, short surveys, and unpublished data, as well as non-English articles and articles published within the considered year range, were excluded. The full versions of the screened articles were then retrieved for the eligibility assessment, the next stage of screening. The author manually evaluated each article's eligibility.

Study risk of bias assessment

Researcher bias in article selection and analysis lowers the quality of reviews [ 8 , 102 ]. Avoiding bias in article selection and analysis requires using a review protocol, adhering to a systematic, objective article selection procedure, using objective analysis methods [ 8 , 102 ], and performing a parallel independent quality assessment of articles by two or more researchers [ 8 ]. By adhering to all of these requirements, the risk of bias in the articles was removed.

Methods of analysis

Biblioshiny and VOSviewer were used for bibliometric analysis. Green finance literature was captured by Scopus and WoS. These databases were used exclusively to get a representative sample of journal articles to study green finance articles. The data were collected and analyzed using Biblioshiny. Select databases can be systematically extracted and analyzed with the software. It collects year-by-year article distribution, journal distribution, country-specific scientific production, most relevant authors, most frequent words, word frequency over time, trend topics, density visualization, etc.

Trends and patterns were found by analyzing green finance paper distribution by year. This analysis shows green finance research's growth. By analyzing article distribution by year, we may also establish green financing and rising theme trends. To identify green finance research publications, article distribution was studied. Academic journal distribution can indicate green finance's prominence in various academic journals. Analyzing scientific production by region reveals regional green finance research tendencies. Scientific production across nations identifies knowledge-producing regions.

Analyzing influential green finance authors helps identify their contributions. This strategy acknowledges influential scholars. The research's most frequently used words reveal the fundamental questions and ideas of environmentally responsible economics. This analysis reveals the discipline's primary topics and studies. By counting words, it may focus on green finance's most important and widely used components. Word frequency can show how green finance's focus has shifted. By tracking word usage, it can identify trending topics. This analysis reveals changing green finance research priorities. Biblioshiny explores green financial trends. This study reveals new topics, research gaps, and subject interests. The trend themes allow us to evaluate green finance studies.

Results and findings

Study selection.

The PRISMA flow diagram illustrates that during the identification step, 528 articles from the WoS database and 1183 articles from the Scopus database that include the term "green finance" were identified. There were 402 duplicates, which were removed. The overall number of articles remained at 1302 at that point. Further attempts were made to include papers on empirical investigations in the final versions that were published in English. 34 non-English articles were thus disregarded. In addition, 295 papers from conferences, book chapters, reviews, news articles, notes, letters, abstracts, and brief surveys were not included. Two articles were disqualified because they were published before 2011. The next step was to retrieve the remaining 978 articles and transfer their pertinent data to an MS Excel file, including the article's title, abstract, keywords, authors' names and affiliations, journal name, citation counts, and year of publication. After that, each article was examined by a third party to determine whether it met the requirements for its eligibility.

Study characteristics

Main information.

This study examined 978 studies by 1830 authors from 59 countries. They've been published in 281 publications. The average number of citations each article received was 12.37. There were a total of 2206 keywords and 44,712 references. This information is detailed in Table  1 .

Annual scientific production

The fluctuations in green financing for scientific production are depicted in Fig.  2 . In 2011, two articles were published that demonstrated interest in this research. No publications were released in 2012, indicating a paucity of research or interest. The trend persisted in 2013 with two articles. One publication appeared in 2014, indicating a halt in research. Since 2015, scientific output has gradually increased. In 2015, three articles contributed to the development of green finance research. Two articles survived in 2016. With eleven articles published in 2017, green finance has become a significant area of study. In 2018, 23 articles were published; in 2019, there will be 42. With 45 publications in 2020, green finance research remains robust. Green finance research increased to 132 publications in 2021. This significant increase in articles on the subject indicates a growing interest in the matter. The publication of 403 research articles in 2022 represents a notable increase. This increase reflects the expanding literature on green finance and its academic significance.

Year-wise research article distribution. Source (s): Author created, 2023

Journal distribution

Table 2 consists of a list of journals that were included in the sample and had more than six relevant papers published inside the journals. The majority of the journals that publish articles relating to green finance are, unsurprisingly, those that focus on environmental science, renewable energy, and sustainability. This is despite the fact that finance is considered an essential component of green financing. Not a single journal in the field of finance was able to attract more than 10 papers.

Based on the number of papers, Environmental Science and Pollution Research emerges as the top journal, demonstrating a strong focus on comprehending the intersection between environmental science, pollution, and financial aspects. The prevalence of journals focused on renewable energy and sustainability, each of which publishes 50 papers, demonstrates the growing interest in examining the financial aspects of sustainable development and renewable energy sources. The fact that Resources Policy was included in the list of 49 papers indicates that a significant emphasis was placed on understanding the financial implications of resource management and extraction.

Green finance is interdisciplinary in nature, exploring the connections between finance and various environmental issues, as evidenced by the existence of interdisciplinary journals like Frontiers in Environmental Science. The existence of journals like Finance Research Letters and Economic Research-Ekonomska Istrazivanja highlights the importance of economic and financial analysis in the context of green finance.

Countries scientific production

The analysis of region frequencies in the provided data in Fig.  3 reveals intriguing patterns and highlights the varying levels of research focus in various countries. The analysis is focused on the top ten countries for scientific production on green finance.

China is the part of the world most frequently mentioned, with a striking frequency of 993. This suggests a significant research interest in comprehending and analyzing diverse aspects of China's economy, policies, and development. Given China's status as the world's most populous nation and its growing global influence, it is unsurprising that researchers have devoted considerable effort to examining China's position in various fields, including finance, sustainability, and innovation.

Pakistan follows with a frequency of 79, indicating a notable but relatively lower research emphasis. Researchers may have investigated particular Pakistan-related topics, such as its economy, governance, or social issues. Pakistan may be of particular interest to a subset of researchers, or there may be a paucity of relevant literature in the analyzed dataset.

With a frequency of 60, the UK is the third-most-mentioned region. This demonstrates a sustained interest in researching various aspects of the UK, such as its economy, financial sector, and policies. It is possible that the historical significance of the UK, particularly in terms of finance and international relations, contributed to its prominence in literature.

Most relevant authors

The prominent and active contributors to the discipline are shown in Fig.  4 . Wang Y has significantly added to the body of literature. The top authors have a constant record of publishing, which shows a dedication to knowledge advancement and suggests a high level of expertise in their field of study.

In this section, the findings that conform to the aims of the research are reported. The conclusions were generated through the use of trend themes, keyword co-occurrence analysis, "most frequent words," and "word frequency over time." During the course of the investigation, both the "keyword co-occurrence; network visualization" and the "density visualization" methods were applied.

Most frequent words

The analysis of the most frequent words sheds light on the emerging themes in the field of green finance, as illustrated in Table  3 and Fig.  5 . A significant emphasis on China, which appears 253 times in the literature, is one of the important observations. This indicates that China's initiatives and role in the context of sustainable finance and green investment are gaining increasing recognition. China's approach to green finance and its potential implications for global sustainability initiatives are likely the primary focus of researchers and policymakers.

The term "finance" appears 122 times, emphasizing the importance of financial mechanisms and instruments to the advancement of green initiatives. This emphasizes the significance of financial institutions, policies, and frameworks that support environmental protection and sustainable development. The frequency of the term "investment" (103) emphasizes the significance of allocating financial resources to environmentally friendly businesses and initiatives.

The 105 occurrences of "sustainable development" indicate the close relationship between green finance and broader sustainability goals. This indicates that researchers and practitioners recognize the need to align financial decisions with environmental, social, and governance (ESG) factors in order to achieve long-term sustainable development objectives.

The terms "green economy" (75) and "environmental economics" (57) refer to the integration of environmental considerations into economic systems and decision-making procedures. This emphasizes the importance of transitioning to environmentally sustainable economic models and policies.

The frequency of terms such as "carbon," "carbon emissions," and "carbon dioxide" (55, 55, and 51 times, respectively) indicates a focus on mitigating greenhouse gas emissions and addressing climate change via financial mechanisms. This is consistent with the worldwide drive for decarbonization and the transition to low-carbon economies.

In addition, the terms "innovation" (71), "impact" (67), and "efficiency" (49) emphasize the significance of technological advancements, measurable outcomes, and resource optimization in green finance. These ideas illustrate the ongoing pursuit of innovative strategies and solutions to promote positive environmental impact while maximizing resource utilization.

The terms "sustainability" (44), "policy" (49), and "financial system" (41) highlight the need for policy frameworks and a robust financial system to facilitate the incorporation of sustainability considerations into mainstream finance. These themes emphasize the critical role that regulations, incentives, and institutional arrangements play in promoting green finance practices and nurturing a sustainable economy.

In addition, the terms "climate change" (50) and "alternative energy" (42) suggest an emphasis on addressing climate-related issues and investigating renewable and sustainable energy sources. This demonstrates an acknowledgment of the role of green finance in the transition to a low-carbon, resilient future.

The relationships between the keywords depicted as nodes are displayed in Fig.  6 's keyword co-occurrence network visualization. The link shows how each keyword relates to the others. In particular, the thickness of the line indicates how strong the relationship is. As a result, Fig.  8 illustrates how China and green finance are connected by a thicker line, showing that the majority of green finance research is carried out in China. Additionally, the connection between finance, sustainable development, and investments in green finance shows their connection to green finance. In Fig.  6 , the nodes are grouped into the red, green, and blue clusters. These clusters contain the keywords listed in Table  3 for each one. The various clusters in Fig.  6 demonstrate how different areas of research had distinct effects on green financing. When keywords are grouped together, it indicates that the topics they refer to are quite likely to be the same. As a result, the red, green, and blue clusters in Fig.  6 highlight common themes, while Table  4 provides explanations for the clusters.

The keyword co-occurrence network visualization

Areas where empirical research is lacking

Figure  7 displays the density visualization map that the VOSviewer generated. The VoSviewer manual states that a node with a red background denotes sufficient research for established knowledge and that it is evident that more study on green finance is still needed. On the other hand, keyword nodes with a green background show that there hasn't been much research on those particular keywords. Other than finance and China, the other keywords in the figure are therefore in the green background, which denotes insufficient research.

The keyword co-occurrence density visualization

Word’s frequency over time

The analysis of words' frequency over time in Fig.  8 reveals a number of significant trends. Beginning in 2018, the frequency of the term "China" increases considerably, with a significant rise in 2022 and a peak of 253 occurrences in 2023. This indicates a growing emphasis on China's role in green finance and its expanding prominence in the academic literature.

The persistent occurrence of the term "finance" over the years indicates the sustained significance of financial mechanisms and instruments in the context of green finance research. Its increasing frequency over time demonstrates the continued emphasis placed on financial aspects of the field.

The consistent growth of the term "sustainable development" from 2016 to 2019 indicates a growing recognition of the connection between green finance and broader sustainability objectives. However, after 2019, its occurrence remains comparatively stable, indicating that sustainable development has become a well-established and consistent theme in the literature.

Similarly, the term "investment" has maintained a consistent presence throughout the years, indicating a continued emphasis on allocating financial resources to green and sustainable initiatives. Its frequency fluctuates but remains relatively high throughout the period under consideration.

The frequency of the term "economic development” increased gradually until 2021, after which it remained relatively stable. This indicates that researchers have acknowledged the need to incorporate economic development and sustainable practices, resulting in a continued emphasis on this topic.

Similar to the term "investments," it has maintained a consistent presence throughout the years. This demonstrates a persistent desire to investigate investment opportunities and strategies within the context of green finance.

The frequency of the term "green economy” increased until 2020, after which it stabilized. This demonstrates an ongoing commitment to transitioning to a greener and more sustainable economy.

The terms "innovation" and "impact" have exhibited a general upward trend over the years. This suggests that innovative approaches to measuring the impact of green finance initiatives and projects are gaining importance.

The term "green finance" has been used significantly more frequently, particularly after 2021. This demonstrates the increasing interest and focus on the specific discipline of green finance, reflecting its emergence as a distinct research area within the context of sustainable finance as a whole.

Trend topics

Insights into novel areas and their developments over time can be gained from an analysis of trend themes using author keywords in the bibliometric data, as shown in Fig.  9 .

Trend Topics

There are nine times where the "Paris Agreement" is mentioned as a subject. It was consistently present from 2019 to 2022, demonstrating a strong interest in comprehending the ramifications and execution of this global climate agreement. The Paris Agreement's effects on environmental regulations and attempts to slow down climate change were probably among the topics on which researchers concentrated.

Seven uses of the word "environment" show that it is a recurring subject. This implies maintaining a focus on environmental concerns and the interactions between human actions and the environment as a whole. It's likely that academics and researchers have examined numerous environmental concerns and their effects on various industries and regulations.

Six occurrences of "regional economy" are found in the literature. This shows a rise in interest in learning about the dynamics and growth of regional economies and how they relate to sustainable practices. The emphasis on regional economies indicates that scholars are looking at the regional and context-specific elements affecting sustainable development and economic progress.

Another subject with five mentions per topic is "crowdfunding". This shows that crowdsourcing is becoming more and more popular as a method of finance, especially for sustainable projects. Crowdfunding's ability to assist green projects, as well as the opportunities and challenges that come with it, has probably been studied by researchers.

With 631 occurrences, the topic "green finance" stands out due to its very high frequency and demonstrates its rising importance in the literature. This demonstrates a rise in interest in the nexus between finance and environmental sustainability. The methods, laws, and procedures that encourage financial investments in green projects and companies have probably been studied by academics and policymakers.

With 92 mentions, "China" stands out as being quite popular. In the context of green finance and sustainable development, this suggests a strong focus on China's participation. Researchers are probably looking at China's policies and initiatives and how they may affect international sustainability efforts.

The phrase "sustainable development" also comes up 70 times, demonstrating a steadfast interest in learning and implementing sustainable practices in a variety of fields. There is a good chance that academics have looked into the frameworks, policies, and tactics that help achieve long-term sustainable development goals.

Seventeen times are mentioned when the term "carbon neutrality" is brought up, which shows that efforts to achieve it are becoming more and more of a priority. To minimize greenhouse gas emissions and combat climate change, researchers have probably looked into a variety of strategies and regulations.

ESG (environmental, social, and governance) is a term with a frequency of ten references, which reflects the growing understanding of the significance of ESG aspects in investment choices and company practices. The incorporation of ESG factors into financial analysis and decision-making processes has probably been researched by researchers and practitioners.

Last but not least, the phrase "green finance policy" is used nine times, showing that policies that support and oversee green finance efforts are a particular emphasis of the study. It's likely that academics and policymakers have looked at how well these policies work and how they affect the growth of sustainable practices and investments.

In conclusion, study subjects that have attracted interest over time are shown by an analysis of trend topics in the bibliometric data. These themes show the continued attempts to understand and manage environmental concerns through research, policy, and finance, from global agreements like the Paris Agreement to specific topics like green finance and sustainable development.

Themes of green finance

This study uncovered a variety of topics relating to green finance as well as potential areas for further research. The descriptions of the themes are presented in Fig.  10 . Different themes related to green finance, along with significant studies that contributed significantly, are discussed below.

Green finance and environmental sustainability

In recent years, there has been a growing emphasis on the significance of green finance and environmental sustainability, leading to increased attention and focus in both academic research and practical applications. The world is currently experiencing an unparalleled environmental crisis, with issues like resource depletion, biodiversity loss, and climate change becoming more pressing. Green finance, which falls under the umbrella of sustainable finance, centers its attention on investments and financial methods that not only yield economic profits but also contribute to favorable environmental consequences.

Existing research mostly focuses on green finance and environmental sustainability in Asian countries, with specific focus on China. Green finance's function in low-carbon development has been thoroughly studied in relation to carbon emissions [ 13 , 147 ]. Green financing and renewable energy growth have also received attention, aiding China's clean energy revolution [ 4 , 12 , 20 , 21 , 40 , 49 , 51 , 56 , 61 , 67 , 72 , 75 , 76 , 80 , 85 , 89 , 97 , 104 , 105 , 107 , 109 , 110 , 119 , 121 , 129 , 135 , 144 , 145 , 149 , 169 , 172 ]. Environmental rules and green finance have also been studied to determine how well they promote sustainable financing [ 19 , 22 , 62 , 114 , 123 , 145 , 159 ].

When it comes to the study of regions outside of Asia, such as Africa, South America, and parts of Europe, there is a significant knowledge gap. It may be helpful to gain useful insights into regional variances and strategies if one is able to comprehend the various ways in which these various regions approach green financing and environmental sustainability initiatives.

Green finance and investments

Following a global shift toward sustainable and ecologically responsible economic practices, green finance and investments have developed dramatically.

Green bond quality and effectiveness, notably in China, is a major study topic. Green bonds finance ecologically friendly projects, therefore verifying their quality is crucial to green financial markets. To help green bonds meet sustainability goals, researchers have studied their quality procedures and standards [ 3 , 6 , 9 , 10 , 33 , 34 , 35 , 38 , 79 , 92 , 95 , 108 , 115 , 164 ]. The relationship between green and non-green investments is another frequent research topic. Researchers have studied the hedging or diversification impacts of these two assets. This study examines how green and non-green investments affect portfolio strategies, risk management, and the financial environment [ 1 , 116 ]. Another interesting relationship is natural resource richness, FDI, and regional eco-efficiency. Given global agreements like COP26, scholars are studying how natural resources and FDI effect regional ecological efficiency as states attempt to combine economic growth with environmental sustainability [ 15 , 36 , 42 , 143 , 157 ].

A key feature of green finance study is how financial institutions, integrate green investment and financing teams. The green finance agenda requires understanding how bank’s structure and behave to encourage sustainable investment. Green financial instrument creation and effect are another study topic. Researchers have examined green finance products including green bonds and minibonds to determine their performance and impact on environmental and sustainability goals. This field helps design policies and strategies to optimize industrial structures and promote sustainable development.

Green finance research examines how it affects industrial structures. Studies have examined how green finance initiatives including loans and investments optimize and shift industrial sectors toward sustainability. These findings are crucial for governments and business stakeholders seeking financial incentives for eco-friendly operations [ 12 , 31 , 46 , 57 , 85 , 96 , 124 , 130 , 139 ].

Green finance market interactions with financial variables must also be assessed for sustainable financial development. Researchers examine the relationship between green financial indices and other financial indicators to better understand how green finance affects the financial landscape [ 27 , 32 , 48 , 68 , 137 ].

Green finance and investments have many unexplored areas, presenting research opportunities. The behavioral dimensions of green investment focus on the psychological drivers and biases that influence investment choices; subnational and local initiatives, which are frequently ignored despite their crucial role in ecological action; cross-country comparisons to provide a more holistic view of effective green finance practices; the role and impact of green finance in emerging economies; and innovative green financial instruments like blockchain. Examining these lesser-known aspects could improve our understanding of sustainability in the financial sector and offer insightful information to investors, financial institutions, and legislators that want to make a positive impact on a more sustainable and environmentally friendly future.

Green finance and innovation

The convergence of green finance and innovation is a crucial topic that addresses the pressing global concerns of environmental sustainability and financial stability. Much study has been done on green finance and innovation, yet various themes and gaps emerge, demonstrating its complexity.

Green financing policies and instruments promote innovation, especially in environmental technologies and renewable energy. Many studies have studied how green funding affects green innovation and if it promotes sustainable technology. They've studied green bonds, green banking, and green finance reform laws, offering empirical evidence that financial incentives combined with green practices can stimulate environmental innovation [ 16 , 41 , 44 , 47 , 52 , 64 , 70 , 81 , 87 , 107 , 133 , 152 , 162 ].

The role of environmental legislation in green financing and innovation is another common theme. Researchers have studied how these restrictions affect green finance's impact on technology. Studying how financial policies and regulatory frameworks interact has helped explain the complex dynamics affecting innovation in environmentally sensitive industries [ 11 , 29 , 54 , 84 , 120 , 126 , 132 , 151 , 152 , 174 ].

Nevertheless, there are obvious gaps in the existing knowledge within the field. The effects of green finance on innovation have been extensively studied, but a better knowledge of the factors driving innovation in other areas is needed. Further study may reveal how green funding might boost innovation in non-environmental industries. How can financial mechanisms support sustainable transportation, agricultural, and urban planning innovation.

Further research is needed on education and the human element in green innovation. How green finance, educational investments, and innovation interact can help individuals, businesses, and societies develop a sustainable future. Green finance and innovation's impact on environmental adaptation and resilience also understudied. More research is needed to determine how financial mechanisms and new solutions may help communities and organizations adapt to climate change.

Green finance policy/green credit guidelines

Climate change and environmental degradation are major worldwide issues. Green finance, which promotes environmentally and socially responsible investments, is a key instrument in this battle. Research and discussion have focused on how green finance policies affect the economy and environment.

The switch to renewable energy is crucial to fighting climate change globally. This transition relies on green financing initiatives. Researchers are investigating how well such regulations promote renewable energy. They examined how green finance regulations affect renewable energy output, investment, and job development in this growing sector. Understanding these implications helps improve green finance initiatives for sustainability [ 18 , 98 , 118 ].

China and other nations have implemented green finance pilot programs to test the waters and stimulate innovation. This research evaluates pilot policy implementation and impacts. Scholars use synthetic control and other tools to study how these initiatives affect green innovation. The results help determine the real-world implications of such experiments and their potential for wider use [ 48 , 113 , 121 , 131 , 146 , 162 ].

Green financing policies vary worldwide. Comparative research of green financing rules can highlight policy differences among jurisdictions. Researchers compared the EU and Russia's green financing laws. These studies emphasize differences, similarities, and the potential influence of these policies on green finance development, promoting cross-border cooperation and knowledge exchange [ 60 , 125 ].

Monitoring and measuring green finance progress is essential for future development. Researchers are developing green finance indices to assess green finance in a country or region. These indices help policymakers, investors, and the public understand green finance's growth and potential [ 141 ].

Despite significant and informative research on green finance policies and their effects on the economy and environment, several research gaps and opportunities for additional investigation remain. First, a thorough evaluation of the durability and long-term sustainability of green finance policies is lacking in the literature. Many studies focus on short-term outcomes, but long-term planning and implementation need understanding these policies' long-term implications. Second, green finance policies' cross-border effects need greater study. As the global economy grows more interconnected, it's important to understand how regional policies affect others and the possibility for international collaboration. Green finance and social effects as creating employment and community development are understudied. Such studies could illuminate these policies' overall impact. Finally, additional multidisciplinary research combining economics, environmental science, and social science are needed to comprehend green finance policies' complex implications. Scholars can fill these gaps to improve our understanding of this crucial topic and inform sustainable policymaking.

Green finance and economy

The relationship between carbon intensity and economic development is a growing topic in green finance research. How nations may shift to low-carbon economies while maintaining economic growth has been studied. Several studies have quantified how green finance policies reduce carbon emissions and boost economic growth [ 63 , 71 , 122 , 155 , 175 ].

The study of the impact of green financing on agriculture, particularly in China, is gaining attention. Green financing impacts agricultural trade, sustainability, and food security, according to researchers [ 37 , 140 ]. Given its connection with economics, food production, and sustainability, this type of researches is crucial.

Efficient utilization of natural resources in Asian countries has gained attention for promoting green economic growth. Researchers have studied how nations might maximize economic gains from natural resources while reducing environmental harm. Addressing sustainable economic development concerns requires this area [ 86 , 101 , 146 , 166 ].

The significance of judicial quality in reducing emissions without hindering economic growth is a common issue in green finance research. Researchers examine how strong legal systems can enforce environmental laws and promote green practices while boosting the economy [ 154 ].

Even while the previously stated research topics have unquestionably enhanced our understanding of the intricacies of green finance, there are still a number of uncharted territories and research gaps that need to be investigated further. Currently, research on green finance mostly focuses on economic and environmental concerns. Integrated research combining economic, environmental, and social science is needed. It can provide a holistic view of green finance policy' many implications. The globalization of green finance policy has significant implications and cross-border effects. These policies' worldwide spillover effects and country collaboration are rarely studied. Research is lacking on how regional policies affect others and international cooperation.

Green finance and corporate social responsibility

Fostering CSR requires understanding how environmental regulations affect companies' sustainable strategies. Researchers should examine how CSR goals can be better aligned with regulations to improve environmental and social outcomes. Researchers have studied green finance-CSR approaches to promote sustainability. This research seeks to understand how green finance initiatives like green bonds and sustainable investment practices affect CSR performance [ 173 ]. Businesses and investors looking to maximize their environmental and social impact must understand these mechanisms.

One intriguing research topic is empirical evidence from heavily polluting enterprises, especially in China. This study shows how green finance can reduce environmental harm and promote CSR in industries with a high environmental impact [ 45 , 66 ]. Researchers can find ways to help heavily polluting companies become more sustainable by studying their experiences.

Bangladesh banks' CSR and green finance practices have also been studied [ 168 ]. This study studies how green financing affects financial institution CSR and environmental performance. Financial organizations can use these results to incorporate environmental responsibility while being profitable. Another relevant research topic is post-pandemic CSR practices as a business strategy to combat volatility and drive energy and environmental transition [ 53 ]. Understanding how CSR and green finance can help companies whether economic downturns and pandemics are crucial. This research can help businesses adapt to changing business conditions.

Further studies can explore socially responsible mutual funds and low-carbon economies. The impact of the investment industry on sustainability and environmental responsibility can be better understood by scholars by examining how these funds affect company behavior and investment decisions. Investors and businesses pursuing sustainable development may find these insights to be beneficial.

Green bond issuance is growing, thus study on its effects on company performance and CSR is needed. Investors seeking to support environmentally responsible businesses and companies contemplating green finance must have a comprehensive understanding of the repercussions on associated with green financing.

Trends/challenges/barriers/awareness of green finance

Regional patterns in China's green finance trends are well-studied, but little is known about applying these findings elsewhere, especially in countries with similar environmental issues [ 24 , 30 , 83 , 88 ]. Analysis of green finance growth by sector is common; however, there may be a knowledge vacuum about how sectors might learn from each other to create more successful sectoral plans [ 28 , 50 , 142 ].

Analyzing the structural barriers to green financing is vital, but also understanding how consumers, financial institutions, and governments can work together to close this gap is crucial. Political and institutional restrictions in green financing have been extensively examined, but cross-national comparisons might reveal similar concerns and inventive solutions. Cultural variety is crucial in ethical and green finance, but the challenges of adapting cultural methods to different places may not be adequately examined [ 7 ].

There were 213 papers pertaining to green finance research that were published between the years 2011 and 2021. However, between 2022 and May 2023, there was an enormous increase in the number of publications, which was 715. These publications can be found in Scopus and WoS. This spike can be associated with a number of causes that have encouraged both academia and industry to focus on sustainable and environmentally friendly practices. These drivers can be found in both the public and private sectors.

To begin, there has been a growing awareness of the urgent need to address climate change and its adverse impacts on the world. An increasing number of demands for action have accompanied this recognition. Green finance provides a means by which funds can be directed toward projects and investments that promote environmental sustainability, such as the development of sustainable infrastructure, clean technologies, and renewable sources of energy. In addition, global initiatives such as the Paris Agreement have put pressure on governments and financial institutions to align their strategies with climate goals, which has led to an increased demand for research on green finance practices and regulations [ 58 ]. Additionally, investors and consumers are becoming more aware of the environmental impact of their financial actions, which is contributing to an increase in demand for environmentally responsible investing products and services [ 39 ]. As a direct consequence of these developing tendencies, researchers and academics have developed responses to them, adding to the expanding body of literature on green finance.

993, more than any other nation, are references to China. This shows a keen interest in learning about China's economy, politics, and development. Researchers have concentrated on China's position in finance, sustainability, and innovation given its status as the world's largest population country and its growing global relevance due to its critical role in fostering sustainable and low-carbon development. Reduced energy use and waste are the goals of energy efficiency measures, which also have a positive effect on the environment by reducing greenhouse gas emissions. Researchers want to comprehend the procedures, regulations, and financial tools that can successfully encourage and support energy efficiency projects, which will ultimately contribute to a greener and more sustainable future. This is why they are focused on energy efficiency within the context of green finance [ 2 , 14 , 60 , 67 , 69 , 74 , 106 , 117 , 134 , 136 , 156 , 160 , 170 ].

The construction of pilot zones for green finance reform and innovations (GFRI) is a significant step the Chinese government has taken to build a green economy. Many authors have conducted surveys on China's GFRI policy and its impact on innovations. The GFRI policy program supports green innovation in large, polluting companies and urban green development by enhancing total factor productivity in pilot cities, emphasizing the importance of debt finance in corporate green innovation [ 40 , 82 , 148 , 150 , 153 , 158 ]. A different study by Wang et al. in 2022 [ 127 ] discovered that while the GFRP generally plays a positive role in fostering green technology innovation capabilities, the extent to which it has an impact varies depending on the region's resources, environment, and level of economic development, with middle- and high-income areas seeing a more noticeable impact. Wang et al. in 2022 [ 127 ] propose a green finance index, employing statistical indicators from 2011 to 2019, to analyze China's green finance development and predict its growth from 2020 to 2024. New energy, green mobility, and new energy vehicles have boosted China's green finance index during the previous nine years, according to research.

The Green Financial Reform and Innovation Pilot Zones (GFPZ) policy's effect on the ESG ratings of Chinese A-share listed firms between 2014 and 2020 is examined in another study. The findings showed that the GFPZ policy raises ESG scores, which are mainly based on social responsibility, and helps businesses in the pilot zones do better financially and environmentally [ 17 ]. In 2023, Shao and Huang [ 111 ] reviewed China's green finance policy mix, showing a shift toward market-based approaches and greater private sector engagement, influenced by dynamic vertical interactions between different levels of government.

Chen et al. [ 14 ] examined the response of China's equity funds to institutional pressure on green finance in 2021. The results showed that funds with negative screening strategies, which exclude environmentally harmful investments, have higher green investment levels and higher financial returns, while funds with positive screening strategies face negative investor reactions despite their green investments.

A study done by Lv et al. [ 88 ] found that while green finance development in China is improving, regional disparities and a polarization trend exist, requiring measures to narrow the gap and promote coordinated development across economic regions. Because it is crucial for striking a balance between economic development, environmental conservation, and social well-being, researchers in green finance concentrate on sustainability. The authors focused on studies on sustainable investment options, analyzed how environmental, social, and governance aspects are incorporated into financial decision-making, and evaluated how sustainability affects financial performance. Researchers are expected to advance ethical and sustainable financial practices and help the world accomplish its sustainability goals by studying sustainability within the context of green finance [ 5 , 25 , 43 , 46 , 59 , 73 , 77 , 90 , 91 , 94 , 104 , 109 , 138 , 161 , 163 , 165 , 167 , 171 ].

In conclusion, research on green finance has primarily focused on Asian countries, particularly China, where it plays a crucial role in low-carbon development and renewable energy growth. However, there is a significant knowledge gap in regions outside Asia, such as Africa, South America, and parts of Europe. Further research is needed to understand regional variances and strategies in these areas.

Studies have examined various aspects of green finance, including green bond quality, the relationship between green and non-green investments, and the impact of green finance on environmental and sustainability goals. Behavioral dimensions of green investment, subnational and local initiatives, cross-country comparisons, and the role of green finance in emerging economies have also been explored. Additionally, the role of green finance in stimulating innovation in environmental technologies and renewable energy has been studied, but there are gaps in understanding its impact on non-environmental industries and the human element in green innovation.

Further research is needed to understand the role of environmental legislation in green finance, its impact on technology, and its cross-border effects. The durability and long-term sustainability of green finance policies should also be examined, along with their social effects such as employment creation and community development. The relationship between carbon intensity and economic development, as well as the alignment of corporate social responsibility goals with environmental regulations, are important areas for investigation.

There is a need for more research on applying the findings from China's green finance trends to other countries facing similar environmental issues. Structural barriers to green financing should be analyzed, and the collaboration between consumers, financial institutions, and governments in closing this gap should be explored. Cultural diversity in ethical and green finance should also be considered, along with the challenges of adapting cultural methods to different places. Overall, further research in these areas can contribute to a more sustainable and environmentally friendly future.

When compared to other fields of study, it is clear that research on green finance has not been investigated to the same extent. In contrast to the less-researched areas of carbon, carbon emissions, climate change, financial systems, policymaking, agriculture, CSR, supply chain, risk management, corporate strategy, regional planning, and governance, green financing has been well-liked with investments, sustainable developments, green innovations, and green economies. On the other hand, taking into account the growing attention paid to sustainability on a worldwide scale and the pressing need to find solutions to the problems posed by the environment, it is quite likely that research into green finance will become more important in the years to come.

The increasing significance of sustainable development and the change to an economy with lower carbon emissions will require the development of innovative financial solutions to support green initiatives and assist the shift toward a financial system that is more friendly to the environment and more sustainable. It is anticipated that researchers will devote a greater amount of attention to green finance as the level of awareness regarding the environmental and social impacts of financial activities continues to rise. These researchers will investigate topics such as sustainable investment strategies, green bond markets, sustainable banking practices, and the incorporation of environmental considerations into financial decision-making. In addition to this, the incorporation of environmentally friendly financial practices into policy frameworks and regulatory measures further emphasizes the requirement for research in this particular area. In general, it is projected that research on green finance will pick up steam in the years to come because it plays such an important role in the process of sculpting a financially sustainable and resilient.

Availability of data and materials

SCOPUS and WoS databases.

Abbreviations

Corporate social responsibility

Financial Technology

Green finance reform and innovations

Green Financial Reform and Innovation Pilot Zones

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Policies for climate finance: Status and research needs

* E-mail: [email protected]

Affiliations Climate Finance and Policy Group, Institute for Science, Technology and Policy, ETH Zurich, Switzerland, Center for Energy and Environmental Policy Research, Massachusetts Institute of Technology, Cambridge, MA, United States of America

Affiliations Institute for Political Science, University of Zurich, Zurich, Switzerland, Perspectives Climate Research, Freiburg, Germany

• Bjarne Steffen, 
• Axel Michaelowa

Published: October 3, 2022

• https://doi.org/10.1371/journal.pclm.0000083
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Citation: Steffen B, Michaelowa A (2022) Policies for climate finance: Status and research needs. PLOS Clim 1(10): e0000083. https://doi.org/10.1371/journal.pclm.0000083

Editor: Jamie Males, PLOS Climate, UNITED KINGDOM

Copyright: © 2022 Steffen, Michaelowa. This is an open access article distributed under the terms of the Creative Commons Attribution License , which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.

Funding: BS acknowledges funding from the European Union’s Horizon 2020 research and innovation programme, European Research Council (ERC) (Grant Agreement No. 948220, Project No. GREENFIN). The funder had no role in study design, data collection and analysis, decision to publish, or preparation of the manuscript.

Competing interests: The authors have declared that no competing interests exist.

Reaching a greenhouse gas emissions pathway in line with the Paris Agreement commitments will require a fundamental transformation of global economies along with massive investment needs [ 1 ]. In the energy sector, for example, a 2°C pathway translates into an annual investment need of 2–4 trillion USD until 2050 [ 2 ]. At the same time, the severe impacts of climate change require investments for adaptation. Accordingly, inducing climate finance flows ranks highly on the climate policy agenda. A growing community of public policy scholars aims to provide evidence-based advice for policymaking with respect to climate finance. Important insights have been gained (e.g., the collection of research and practitioners’ experiences in [ 3 ]), although we believe that many aspects are still severely understudied.

The international policy discourse considers climate finance from two related but distinct perspectives. First, since 1997 when the Kyoto Protocol enabled developing countries to generate revenues from the sale of emission credits through the Clean Development Mechanism (CDM), policies that mobilize climate-related monetary transfers from developed to developing countries have been deemed necessary. After all, many developing countries have contributed very little to climate change but are heavily affected by its consequences. Finance has been very prominent in UNFCCC negotiations since 2009, when the concept of public international climate finance was enshrined in the Copenhagen Accord’s goal of mobilizing 100 billion USD by 2020. This goal subsequently led to the creation of the Green Climate Fund. The Paris Agreement addresses this through Article 9 (provision of financial resources) and in Article 6 (voluntary collaboration through international carbon markets and non-market approaches). Second, and more recently, awareness is increasing that policy interventions are required to re-direct finance flows from high-carbon to low-carbon assets worldwide. In this sense, climate finance has received much attention within the financial sector since the negotiation process for the Paris Agreement [ 4 ], and it resulted in the Agreement’s Article 2.1c explicitly calling for the re-direction of finance flows.

Both perspectives on climate finance policies have been taken by extant research. Building on the insights gained thus far, we believe that future work can help policymakers by (ex-ante) developing new policy designs to induce climate finance flows on the international and national levels, and by (ex-post) measuring the effectiveness of policy interventions more rigorously.

Concerning climate finance in the sense of international monetary transfers (PA Art. 9), as discussed in [ 3 ], accounting remains heavily contested, with many observers stating that only a fraction of the 100 billion USD target has actually been achieved. Additionally, adaptation finance has lagged behind mitigation finance, probably due to the absence of universally agreed-upon metrics. Allocation seems to be linked not only to the actual needs of vulnerable groups but also to the interests of donors. While some bilateral funding programs, such as Germany’s IKI, have performed well, multilateral development banks and dedicated climate funds have been criticized for cumbersome procedures and inconsistent monitoring approaches. A more ‘polycentric’ approach involving actors with legitimate stakes in ownership and accountability of funding beyond contributor and recipient governments could resolve some of these challenges. However, the appetite of voters and policymakers to underwrite significant transfers abroad may be limited [ 5 ]. The negotiations on the goal of international climate finance after 2025 will illustrate this clearly. Critical topics needing more research include policy designs for the blending of climate finance and international carbon markets [ 6 ], the evaluation of the effectiveness of interventions, particularly regarding adaptation finance [ 7 ], and resulting institutional learning of funding agencies and the political economy of climate finance allocation .

Concerning climate finance in the sense of re-directing finance flows (PA Art. 2.1c), policy output has high momentum, particularly in OECD countries, with the aim of making low-carbon assets more attractive for financiers than high-carbon assets [ 4 ]. While such policies are being enacted at a fast pace, substantial research is needed on how best to design them. Past work has led to a solid understanding of what works to mobilize finance for new low-carbon assets , such as renewables; for example, policy designs that simultaneously address return and risk characteristics [ 8 ] and direct market activity from Green State Investment Banks [ 9 ]. The literature has also studied potential drivers to reduce the cost of capital for clean energy technologies [ 10 ]. Much less is known about how to effectively discourage investment in high-carbon assets , an imbalance that future research should address. Recent work scrutinized drivers for fossil fuel divestment decisions [ 11 ] and other mechanisms for investor impacts on the climate [ 12 ], but the role of climate finance policies in discouraging high-carbon investment remains largely elusive.

While some assets are clearly climate friendly (e.g., renewables) or unfriendly (e.g., new coal power plants), there are many technologies and business models “in between.” Here, governments can leverage their information nodality by defining taxonomies and labels [ 4 ]. The European Union (EU) is a frontrunner in this regard, and researchers have put great effort into defining a science-based foundation for the EU Green Taxonomy (e.g., via the Platform for Sustainable Finance [ 13 ]). Unfortunately, recent key aspects of the taxonomy have been softened in the political process; we need a better understanding of the underlying politics that influence climate finance regulations in the EU and beyond, which is another area for future research.

Abstracting from specific technologies, other policy interventions attempt to improve companies’ climate-related financial disclosures in general [ 4 ]. The underlying idea that increased transparency on climate impacts will lead to a re-allocation of investments is contested [ 14 ], and, indeed, we lack evidence as to what extent such information mandates are actually effective. Finally, the economic literature increasingly considers the role of central banks in climate finance, and research on “green” monetary policy designs is gaining traction [ 15 ].

In sum, it is encouraging to see the momentum in climate finance policymaking–although policy activity alone is not a guarantee for actual progress in mitigation and adaptation. Policies need to be well designed and continuously evaluated for their effectiveness. Following the agenda described in this piece, climate policy scholars can contribute to this important endeavor.

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• 3. Michaelowa A, Sacherer A-K. Handbook of International Climate Finance. Edward Elgar Publishing; 2022.

What is green finance and why is it important?

Renewable energy projects often fall under green finance initiatives. Image:  REUTERS/Mike Hutchings

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Stay up to date:, climate crisis.

• Green finance is any structured financial activity that’s been created to ensure a better environmental outcome.
• The value of green bonds traded could soon hit $2.36 trillion.
• The European Central Bank is getting heavily involved in green finance.
• The top three green bond issuers are the US, China and France.
• The World Economic Forum’s Green Horizon Summit focuses on how green finance can help in the recovery from COVID-19.

Green finance is blossoming. Globally, the green bond market could be worth $2.36 trillion by 2023. It is regarded as a way of meeting the needs of environmentalism and capitalism simultaneously – but what is green finance and how does it work?

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Green finance can bolster india’s transition to net-zero. here's how, these countries are leading the way in green finance.

At its simplest, green finance is any structured financial activity – a product or service – that’s been created to ensure a better environmental outcome. It includes an array of loans, debt mechanisms and investments that are used to encourage the development of green projects or minimize the impact on the climate of more regular projects. Or a combination of both.

Funding sustainable development

For the United Nations, green financing plays an important role in delivering several of its Sustainable Development Goals. Its Environment team is already working with public and private sector organizations in an attempt to align international financial systems to the sustainable development agenda.

Some of the activities UN Environment is involved in include helping countries re-engineer their regulatory frameworks – so that green borrowing becomes compliant, for example – and helping steer public sector planning in a more environmentally friendly direction.

Clean sources of energy can be brought to fruition through the right combination of planning consent, strategic priorities and availability of capital. Such projects could be given preferential treatment to make them a more attractive option than, for example, fossil-fuel derived energy infrastructure.

Typical projects that fall under the green finance umbrella include:

• Renewable energy and energy efficiency
• Pollution prevention and control
• Biodiversity conservation
• Circular economy initiatives
• Sustainable use of natural resources and land

Growing international interest in green finance

One common green finance instrument is the green bond. There is a code of conduct that defines what constitutes a green bond . To qualify, a bond must adhere to criteria on the use of proceeds, have a process for project evaluation and selection, ensure proper management of any proceeds, and offer detailed reporting.

The US, China and France are the three biggest issuers of green bonds. Presently, the European Central Bank holds around 20% of all euro-denominated green debt , even though it only started buying corporate bonds as recently as 2016, which indicates that the bank sees this as a way to further its own green agenda.

At a national level, too, central banks are making noises about prioritizing greener investment. The Swedish Riksbank has begun divesting fossil-based holdings, selling bonds from some Australian and Canadian provinces.

“The Riksbank needs to analyse and manage the economic consequences of climate change ,” the bank’s deputy governor Martin Flodén said in November 2019. “We can contribute to the climate work to some extent by giving consideration to sustainability aspects when investing in the foreign exchange reserves.”

The City of London Corporation, in collaboration with the Green Finance Institute, and supported by the World Economic Forum, is this month hosting the Green Horizon Summit , a virtual event looking at the role of green finance in the recovery from COVID-19.

The summit will explore ways to ensure public and private finance is used to back the transition to a sustainable and resilient future for all.

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This course will introduce the theoretical foundation, empirical evidence, and practice of green finance globally and in China. The course will focus on how the financial policies and markets can be leveraged to mobilize investment in sustainability. Specifically, we will introduce the green banking system, green bond, green fund, and green insurance. We will pay particular attention to the climate finance that stimulates investment in decarbonization and conservation finance that promotes biodiversity conservation in investment activities. The course is combination of lectures and seminars that will be largely run by student presentations.

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Original research article, green finance and carbon emission reduction: a bibliometric analysis and systematic review.

• 1 Business School, University of Jinan, Jinan, China
• 2 Jinan Foreign Language School, Jinan, China
• 3 Institute of Green Development, University of Jinan, Jinan, China

Green finance is an emerging topic which is broadly discussed in context of adapting and mitigating environmental deterioration due to climate change. As an effective incentive mechanism, it provides strong support for carbon emission reduction. However, a limited review articles investigate the specific combination of green finance and carbon emission reduction. Here, we apply a bibliometric analysis to review research on green finance and carbon emission reduction based on the literature from 2010 to 2021 in the Web of Science core database. The results indicate that countries with the most publications were those with high economic development, salient environmental problems, and a strong demand for ecological protection. Top publishing journals include Climate Policy, Journal of Cleaner Production, and Energy Policy. The author collaboration is fragmented, mostly less than three researchers. Based on analyses of keyword frequency and centrality, deforestation, carbon markets, and financial development were the most significant research topics. The research hotspots included clean development mechanism, adaptation, carbon market, and sequestration. Finally, the DPSIR framework is applied to explore driving forces, state, pressure, impact and response of current research. We hope our work provides a systematic review of green finance for carbon emission reduction to boost the research in this field.

1 Introduction

With economic and social development, natural systems are undergoing rapid changes, especially due to carbon emissions, which have increased significantly ( Figure 1 ). Although carbon emissions were substantially mitigated during the COVID-19 outbreak, the world’s CO 2 emissions still reached 41.4 billion tons in 2020. Excessive carbon dioxide has led to serious global issues, such as glacial melting, sea level rise, and extreme regional climate change ( Diffenbaugh et al., 2017 ; Garbe et al., 2020 ; Gomez et al., 2020 ; Tabari, 2020 ; Yalew et al., 2020 ), further exacerbating the imbalance of global socioeconomic development ( Diffenbaugh and Burke, 2019 ). Meanwhile, animal migration due to global warming will potentially result in a series of crises comparable to the COVID-19 pandemic. Bill Gates, the co-founder of Microsoft, warns that global warming will have a profound influence in the long term that will be greater than impact of the COVID-19 pandemic in the short term ( Gates, 2020 ).

FIGURE 1 . Global green investment and carbon emissions. The bar chart represents the amount of green investment (in billions of dollars). The line gragh represents the carbon emissions released into the atmosphere (in parts per million). Source: Bloomberg.

To avoid irreversible catastrophes, the United Nations Framework Convention on Climate Change (UNFCCC) was formed at the initiative of the United Nations. Parties organize meetings to evaluate the progress in addressing climate change issues. The Kyoto Protocol was agreed upon in 1997, prompting developed countries to meet their legal obligations to reduce greenhouse gas emissions. The Copenhagen Protocol, adopted in 2009, re-established the obligations of developed and developing countries to reduce emissions ( Grubb et al., 2018 ). As the largest developing country, China is actively fulfilling its obligations to reduce its carbon emissions. At the 75th UN General Assembly, the Climate Ambition Summit, and the Central Economic Work Conference, President Xi Jinping of China made important commitments that China will strive to reach carbon peak by 2030 and achieve carbon neutrality by 2060. Meanwhile, the Chinese government has also introduced a series of policies to promote the implementation of carbon emission reduction. For example, in January and March 2021, the release of the Measures for the Administration of Carbon Emissions Trading (in Trial) and the Corporate Greenhouse Gas Emission Reporting Guidelines (in Trial) marked the official start of China’s carbon market. These policy documents also provided a basis for the verification of greenhouse gas emissions.

As an important investment and financing tool, green finance is defined differently in different countries. The European Commission considered it to be a financial instrument for supporting the combination of climate change mitigation, adaptation, and other green dimensions ( Walter et al., 2017 ). In contrast, the People’s Bank of China (PBOC) defined it as a set of institutional arrangements and policies to facilitate the transfer of private capital to green sectors through financial services ( Pan et al., 2015 ). Overall, green finance takes various forms, such as green bonds, green credit, green funds, and carbon finance, providing important guarantees for addressing climate change, and it can effectively allocate resources to green development projects ( Eyraud et al., 2013 ; Kamra and Grover, 2021 ). According to a report by the United Nations Intergovernmental Panel on Climate Change (IPCC), to control global warming within 1.5°C, the average investment in the energy system should be between $1.6 trillion and $3.8 trillion between 2016 and 2050 ( de Coninck et al., 2018 ). Globally, the scale of green finance invested in climate change mitigation projects has increased rapidly in recent years ( Figure 1 ), but it is still far from the target set by the IPCC. Consequently, the international community is striving to take more effective measures to increase green finance investments for climate change mitigation and adaptation.

Several countries or organizations have played pivotal roles in green finance and cooperation in green finance. In 2016, the G20 included green finance as an issue to strengthen cooperation among national financial institutions. The European Commission has adopted a package of sustainable finance policies to provide companies with an integrated and sustainable framework to ensure financial transformation while avoiding greenwashing. For instance, the Proposal for a Corporate Sustainability Reporting Directive (CSRD) extends the types of companies that must disclose sustainability information to include all large and listed companies. The EU Taxonomy Climate Delegated Act specifies what green activities can contribute to meeting environmental goals and encourages companies to start new projects or upgrade existing projects. In the United States, with the election of a new president, the United States government is committed to tackling the problem of climate change problem. In January 2021, President Bidon announced that the United States is re-joining the Paris Agreement, after having been withdrawn from the Agreement by President Trump. The United States government has also launched a $2.3 trillion infrastructure proposal to make intensive investments in projects targeting, for example, the country’s transportation, energy and power systems ( Tollefson, 2021 ).

China is also actively promoting the vigorous development of green finance. In 2016, the PBOC issued the Guidelines for Establishing the Green Financial System , providing a top-level design for the development of green finance in China. In June 2017, the Chinese state designated five provinces, namely, Zhejiang, Jiangxi, Guangdong, Guizhou and Xinjiang, in which to build green finance pilot zones. In March 2019, the National Development and Reform Commission, together with seven ministries and commissions, issued the Green Industry Guidance Catalogue (2019 Edition) to set industry standards. In February 2021, the Guiding Opinions on Accelerating the Establishment of a Sound Green, Low-Carbon and Circular Development Economic System were issued by the State Council of China. Subsequently, China’s first green finance regulation, the Shenzhen Special Economic Zone Green Finance Regulations , came into effect in March 2021, providing a guarantee to promote the regulation of green finance and to guide the orderly development of related institutions.

Against the backdrop above, recent studies on green finance and carbon emission reduction have been conducted. Such studies involve aspects such as the performance of green finance, risk assessment, and carbon emission reduction policy design. Therefore, a systematic review of the existing field is needed. Several bibliometric analyses on carbon emission reduction have been conducted. For instance, Zhang and Liang reviewed cooperation on carbon emission reduction ( Zhang and Liang, 2020 ), and Huang et al. identified empirical methods of modelling Chinese sectoral carbon emissions ( Huang et al., 2019 ). Additionally, the literature has focused on climate-related financial tools, such as the carbon market ( Zhou and Li, 2019 ; Tang et al., 2020 ), carbon tax ( Zhang et al., 2016 ), and green supply chains ( Zhou et al., 2021 ). Nevertheless, a limited number of articles take a broader perspective to focus on green finance. Although some studies mention green finance ( Cai and Guo, 2021 ; Cunha et al., 2021 ), they do not investigate the specific combination of green finance and carbon emission reduction. Therefore, we comprehensively review the recent literature on green finance and carbon emission reduction in the Web of Science core database. The following research objectives will be addressed by this article:

RQ1: What is the trend in the number of publications in the research field?

RQ2: What are the predominant countries, institutions, journals, research areas, and authors in the current field of research?

RQ3: What is the state of cooperation between authors and countries?

RQ4: What are the primary research priorities at the moment, and how have they changed over time?

RQ5: What research topics and references were highlighted at certain points in time?

RQ6: What are the main research directions in the current field?

By addressing the questions above, we will have an insight to the performance (RQ1-RQ3), progress (RQ4-RQ5), directions, challenges as well as future research (RQ6) of green finance and carbon emission reduction.( Lim et al., 2022 ).

The remainder of the paper is organized as follows: Section 2 introduces the methodology of the bibliometric analysis and search criteria. Section 3 presents the findings of the analysis, including the number of annual publications, major areas and institutions, publishing journals and research areas, authors, and keywords. Section 4 summarizes the research topic in DPSIR framework. Lastly, Section 5 draws our conclusion and policy implication.

2 Methodology

Bibliometric analysis, which is a quantitative way of discovering and evaluating articles in the corresponding research field, has seen a marked growth in use over the last two decades.( Zupic and Čater, 2015 ). Due to the complexity of the environmental issues, research might be conducted in an interdisciplinary approach, with the collaboration of universities, laboratories, non-governmental organizations, and financial institutions. As a result, compared with narrative literature evaluation, bibliometric analysis avoids the subjectivity of authors and incompleteness of contents, both of which are driven by the huge and intricate articles in the corresponding research field.( Donthu et al., 2021 ; Mukherjee et al., 2022 ). Moreover, the science mapping tools help to illustrate the cooperation, trends, and hotspots in a certain period of time, thus they can be presented in a more visualized way.( Romanelli et al., 2021 ). Consequently, by utilizing the bibliometric analysis approach in environmental scenarios, researchers will have a holistic view of the corresponding area, and it is also substantially significant to the development of environmental science.

To perform the bibliometric analysis, we used CiteSpace software developed by Prof. Chaomei Chen of Drexel University and visualization technology to construct a scientific map of the literature. Consequently, we can gain an in-depth understanding of the hotspots, correlations, development directions and trends of the field of study ( Chen, 2004 ). Meanwhile, this software has been used in various bibliometric analysis studies ( Ouyang et al., 2018 ; Su et al., 2019 ; Ye et al., 2020 ), indicating that it can support our research.

To ensure the quality of the literature, the Science Citation Index Expanded (SCI-EXPANDED) and Social Sciences Citation Index (SSCI) from the Web of Science core database were selected for the search. Since there were very few studies on related topics in the database before 2010, the time range of the selected literature in our work was 2010, 2021, and the endpoint was August 2021.

Based on the research field, we determined the search criteria, including “carbon”, “carbon dioxide”, “green finance”, “carbon finance”, “sustainable finance”, “climate finance”, “green credit”, “green venture capital”, “green bond”, and “green security”. The search string is as follows:

TS = ((“carbon” OR “CO 2 ” OR “carbon dioxide”) AND (“green financ*” OR “carbon financ*” OR “sustainable financ*” OR “climate financ*” OR “green credit” OR “green venture capital” OR “green investment*” OR “green bond*” OR “green securit*”))

Finally, we performed the Preferred Reporting Items for Systematic Reviews and Meta-Analyses (PRISMA) ( Moher, 2009 ) to exclude unqualified articles ( Figure 2 ). After careful screening, we obtained 445 papers for the following analysis.

FIGURE 2 . Flowchart for conducting a literature search using the PRISMA approach.

3 Research Overview

3.1 number of annual publications.

Analysing the temporal trend of the literature ( Figure 3 ), we see that the number of articles has undergone two main phases: the first phase was from 2011 to 2018. During this period, the number of articles published was small, and the growth was slow, with 17 articles in 2011 and 40 articles in 2018. The second phase was from 2018 to 2020. During this period, the number of articles published increased rapidly, from 40 in 2018 to 92 in 2020. This increase was mainly because after 2019, more than 190 countries clearly defined and implemented their nationally determined contribution (NDC) targets to reflect their determination to address climate change, attracting the attention of scholars. The number of papers published in the first 8 months of 2021 was 73, and we expect that the total number will be higher than the number of papers published in 2020, reflecting an upward trend into the future.

FIGURE 3 . Number of publications from 2011 to August 2021.

3.2 Major Areas and Institutions

Figure 4 shows the distribution of countries with the highest number of publications. Of the top 10 countries, 8 are developed countries. Developed countries have higher levels of economic development, more advanced technology, and better research conditions; thus, they pay more attention to the development of the theory and practice of green finance. As developing countries, China and India are both large countries in terms of their population and economy. Meanwhile, environmental problems are also prominent. As a result, there is a greater emphasis on the development of green finance theory and practice in those countries.

FIGURE 4 . Number of selected studies published by different countries.

The research cooperation between different countries is illustrated in Figure 5 , which shows the collaborations between countries on the themes of green finance and the carbon emission reduction. The links indicate the collaborations between different countries, while the colours of the links indicate the dates of the collaborations. The results indicate that China, the United States, and the United Kingdom published the highest number of papers. The United Kingdom, the United States, and Canada produced studies earlier, while China, Germany, and Australia produced studies later. Additionally, the purple outer ring indicates the centrality of countries, and countries with a higher centrality have a wider outer ring. Of the top countries, the United States, the United Kingdom, China, France, Switzerland, and the Netherlands are the countries with the highest centrality.

FIGURE 5 . Network map of countries publishing papers. The links indicates cooperation between the related countries, and the colours represent the dates of the cooperation. The size of a circle is proportional to the number of studies contributed by countries or regions.

The top 10 most productive institutions are presented in Table 1 . The institution with the largest number of publications is Oxford University in the United Kingdom, which has published 9 high-quality related articles. Overall, most of the top 10 publishing institutions are from developed countries such as the United Kingdom, Canada, France, and Germany. However, institutions in China are also strengthening their research efforts, and of these institutions, Tsinghua University has performed the best.

TABLE 1 . Number of articles published by institution.

Analysing countries and institutions, we divide the relevant research into the following aggregate areas. First, developed countries and regions such as the United States, Europe, and Australia, which have great economic strength and where the financial industry developed early, coupled with more well-established research institutes, started publishing related works earlier, and the number of publications is also higher. Second, developing countries such as China and India focus on the construction of infrastructure. Both of them demand to solve the corresponding environmental problems; consequently, they need a large amount of funds to implement green projects. Finally, developing regions with vast forest resources, such as South Asia and South America, have sinks that can store significant amounts of carbon. The United Nations launched the Reducing Greenhouse Gas Emissions from Deforestation and Forest Degradation in Developing Nations (REDD+) initiative to fund countries that actively promote sustainable development and expand their forest carbon sinks ( Fahey et al., 2010 ). As a result, numerous studies have been conducted on the carbon reduction and economic benefits of REDD + projects ( Fuss et al., 2011 ; Nunes et al., 2012 ).

3.3 Publishing Journals and Research Areas

Figure 6 depicts the 10 journals and research fields that produced the most articles. Climate Policy (34 articles) contributes the most, followed by the Journal of Cleaner Production (27 articles) and Energy Policy (18 articles). Most articles involve the following research areas: ecological and environmental sciences (237 articles), followed by business and economics (80 articles), other subjects in science and technology (72 articles), energy and fuels (42 articles), engineering (39 articles), and public administration (38 articles).

FIGURE 6 . Productive journals and research fields. A single article can be categorized under several research directions.

3.4 Authors of the Publications

Table 2 lists the top 10 most productive authors. Among them, Professor Monasterolo Irene of the Vienna University of Economics and Business published the most articles. Her research directions are related to climate stress testing, the evaluation of climate risk and financial risk, and the EIRIN stock-flow consistent behavioural model. Her publications have appeared in Nature Climate Change, Environmental Science & Policy, Ecological Economics, and other journals ( Pasqualino et al., 2015 ; Howarth and Monasterolo, 2016 , 2017 ; Battiston et al., 2017 ; Monasterolo et al., 2017 , 2018 ; Monasterolo and Raberto, 2018 , 2019 ; Monasterolo and de Angelis, 2020 ), and the most influential article has gained 307 citations.

TABLE 2 . Productive authors and their institutions.

We investigated 1-year time slices of authors who published articles between 2010 and 2021 and visualized the cooperation network among the authors. Figure 7 demonstrates that collaborations occur mostly in pairs; additionally, groups of three or more collaborators are relatively rare. In general, the network density of collaborating authors is 0.0066, indicating that the majority of researchers prefer to conduct research individually ( Tang et al., 2020 ).

FIGURE 7 . Cooperation network of different authors. The links indicate the cooperation of related authors, and the colours represent the dates of the cooperation.

3.5 Keyword Analysis

Figure 8 shows the frequency of keywords. The most frequent keyword is “climate change”, followed by “policy”, “climate finance”, “CO 2 emission”, “impact”, “economic growth”, “China”, “energy”, “carbon finance”, “carbon”, and “carbon market”.

FIGURE 8 . Network of keywords by frequency. The links indicate the connections of related keywords, and the colours represent the dates of the connections. The size of a circle is proportional to the frequency of the keywords.

The centrality of a node represents the node’s connection with other nodes; the higher the centrality is, the greater the importance of the node’s participation in the network. As shown in Figure 9 , the keyword with the highest centrality is also “climate change”, other keywords are “policy”, “energy”, “long-term”, “challenge”, “impact”, and “model".

FIGURE 9 . Network of keywords by centrality. The links indicate the connections of related keywords, and the colours represent the dates of the connections. The size of the cross icon is proportional to the centrality of the keywords.

Figure 10 further shows the temporal evolution of keywords between 2011 and 2021. The high-frequency keywords in the early research direction (2011–2013) were mainly “climate change”, “climate finance”, “carbon finance”, “China”, “policy”, and “energy”. In the following 3 years (2014–2017), the high-frequency keywords were “emission”, “conservation”, “market”, “economic growth”, and “performance”. The main keywords in recent years (2018–2021) were “renewable energy”, “CO 2 emission”, " energy consumption”, “green finance”, and “green bond”. In short, the research direction has shifted over the last decade from exploring the related policy design to exploring the efficiency and environmental protection effect of green finance. Additionally, with the emergence of new energy sources and financing mechanisms such as green bonds and green credits in the last few years, the research direction has updated to reflect these developments.

FIGURE 10 . Temporal evolution of keywords from 2011 to 2021. The links refer to the connection of related keywords, the colour of which represents the time of connection. The size of a circle is proportional to the frequency of keywords.

3.6 High Burstiness of Keywords and References

Burstiness refers to a surge in keywords or cited studies over a specified time period, indicating that they draw widespread attention from the research field during that time period. Thus, burstiness detection is useful for determining the degree to which keywords or articles in this field are at the frontier of research. As a result, this study examines the burstiness of keywords and referenced studies.

3.6.1 High Burstiness of Keywords

Figure 11 shows the keywords with high burstiness. From 2011 to 2021, in chronological order, they are “carbon finance”, “clean development mechanism”, “adaptation”, “carbon sequestration”, “stock”, “carbon market”, “sequestration”, “conservation”, “governance”, “emission”, “mitigation”, “trade”, “political economy”, “management”, “CO 2 emission”, “green finance”, and “green bond”. The keywords with a longer burstiness (lasting for more than 3 years) are “clean development mechanism” (2011–2015), “adaptation” (2012–2016), “carbon market” (2013–2017), and “sequestration” (2014–2017). These results indicate that these keywords are typically topics of high interest for a long period. Currently, “CO 2 emission”, “green finance”, and “green bond” are becoming more popular, as they appeared in 2019 and had lasted into the present.

FIGURE 11 . High burstiness of keywords. The green line represents the period during which the keyword appeared, and the red line indicates the period during which the keyword received wide attention.

3.6.2 High Burstiness of Publications

A thorough examination of the literature based on its high emergence in the relevant years helps summarize the research hotspots in different periods ( Figure 12 ). The following literature is utilized in this study to demonstrate the hotspots of research.

FIGURE 12 . High burstiness of references. The green line represents the period during which the reference appeared, and the red line indicates the period during which the reference received wide attention.

Pendleton et al. ( Pendleton et al., 2012 ) focus on blue carbon research. Most of the literature studies the reduced carbon sequestration capacity of coastal vegetation ecosystems due to their destruction, while little literature has considered that these vegetated environments (i.e., sediments such as silt) also have sinks that can store large amounts of carbon that is released into the atmosphere with the destruction of coastal vegetation ecosystems, resulting in increased greenhouse gas concentrations. This article is the first to measure the global storage of blue carbon and to estimate the economic impact of releasing these sinks into the atmosphere; thus, it contributes to the establishment of carbon accounting and carbon markets.

Stadelmann et al. ( Stadelmann et al., 2013 ) focus on the accounting of private capital in addressing climate change. According to the Copenhagen and Cancun Agreements, developed countries mobilized $100 billion per year in public and private finance for developing countries through 2020. Most of the existing literature has studied public finance, but research on private finance is limited. The article summarizes the different ways of financing private capital and analyses their quality.

Lee and Min ( Lee and Min, 2015 ) examine the relationship between environmental innovation and firm performance from the firm perspective. A consensus on the relationship between environmental innovation and business performance has yet to be reached. Consequently, additional research about the impact of eco-innovation on company performance is required. This article investigates the relationship between green research and development (R&D) investment and carbon emissions and financial performance.

Wang and Zhi ( Wang and Zhi, 2016 ) demonstrate the status of green finance. First, they summarized the market mechanism of green finance and green finance products, which play an indispensable role in adjusting the scale, speed and structure of economic development through the leverage effect. The article also proposes that policy is important for raising funds for environmental protection industries, whose payback period is long. It suggests that in the future, innovation and development should focus on both financial tools and fiscal revenue management.

Battiston ( Battiston et al., 2017 ) concentrate on the financial concerns associated with climate change. While a number of climate measures have been implemented to achieve the 2°C global temperature target, the question of whether these policies will result in systemic hazards in the financial sector has generated much debate. This paper establishes a framework for conducting climate stress tests, evaluates how risks associated with climate policies are transmitted via the financial sector, and assesses the impact of policy risks on large financial institutions.

Monasterolo and Raberto ( Monasterolo and Raberto, 2018 ) examine the role of monetary policy, fiscal policy, and financial instruments in the design of climate change responses. They find that there is a high level of uncertainty in the analysis results because a comprehensive understanding of the direct and indirect effects of the real economy and financial markets is lacking. Consequently, they create a set of EIRIN models and illustrate the influence of business investments in brown and green sectors on unemployment, credit and bond markets, and other variables.

Campiglio et al. ( Campiglio et al., 2018 ) take the broader view of central banks and associated regulators on climate change and the low-carbon transition. They point out that central banks and regulators should evaluate climate-related financial risks, as climate change that is not mitigated will potentially influence financial stability. Moreover, they argue that future research should focus on developing effective methods and collecting data to assess climate change risks, as well as models for evaluating the impact of climate-related risk on the macroeconomy and society.

4 Research Topics Classification in the DPSIR Framework

The Driving-Pressure-State-Impact-Response (DPSIR) model is generally used to construct a conceptual framework of the interaction between environment and society ( Wei et al., 2019 ). In order to present a holistic view of the research topic, we carefully review and then classify the related articles in DPSIR framework. The logical relationship is illustrated in Figure 13 .

FIGURE 13 . Research topics of green finance and carbon emission reduction in DPSIR model.

4.1 Driving Forces

The implementation of green finance at the regional scale is motivated by the need for regional sustainable development, and it is promoted by appropriate economic policies. Several studies have examined the processes through which macro- and microeconomic policies related to climate change affect green financing. Public finance, taxes, Clean Development Mechanism (CDM) financing, and private cost financing are common policy mechanisms that have varying implications for the growth of green finance ( Bowen, 2011 ; Aglietta et al., 2015 ; Zhang et al., 2021 ). As a new green financing technique, carbon tax has an influence on the profitability and environmental performance of supply chains, making it possible to identify the optimal strategic investment decisions under each tax model ( Chelly et al., 2021 ). Feed-in-tariff (FIT) and carbon pricing policies benefit green investments ( Eyraud et al., 2013 ). Some studies also consider more factors, such as politics, the economy and culture, in promoting green finance ( Du et al., 2019 ; Nawaz et al., 2021 ). However, Xu et al. ( Xu et al., 2017 ) take sectoral panel analysis in China and find that climate policies have favourable effect on investments in transportation sector, but have no effect on biofuel, agriculture, or building sectors. Cojoianu et al. ( Cojoianu et al., 2020 ) argue that FIT policies have a negative impact on the new entry of grey and brown funds.

4.2 Pressure

Ignoring climate risks when setting financial policies may undermine their effectiveness. The uncertainty of climate change can weaken the performance of financial policies ( Bhandary et al., 2021 ). For example, infrastructures that are vulnerable to climate change may perform poorly in the long term, resulting in feeble investment ( Reynolds et al., 2020 ). Additionally, the risk of climate change is of greater concern to institutional investors, and they need assurances that their portfolios will not be affected by this potential risk ( Bender et al., 2019 ). A limited number of studies have made mention of the dimensions above ( Clapp and Prag, 2012 ). D’Orazio and Popoyan ( D’Orazio and Popoyan, 2019 ) suggest that greater capital requirements should be imposed on banks with brown assets to mitigate the risk of expanding green financing. Future research should incorporate climate factors when assessing the effectiveness of green finance projects and policies and quantitively analyse the risk from the business perspective.

Driven by policy and climate risk, many countries or institutions in the world are exploring the mechanism of green finance to mitigate carbon emission and adapt to climate change. At present, countries or institutions have implemented various green taxonomic practices to classify green assets. First, the International Organization for Standardization (ISO) established a technical committee (ISO/TC 322) to support the United Nations Sustainable Development Goals (SDGs). One of the committee’s objectives is to standardize the principles, terminology, and assessment of green finance, and several standards are under development, including ISO 32210, ISO 32220, and ISO 14100. Second, the European Union Commission published the first EU sustainable plan in March 2018, i.e., Action Plan: Financing Sustainable Growth , and then established a Technical Expert Group on Sustainable Finance (TEG) in May 2018. The final report on the EU taxonomy and Technical Annex were released in March 2020 to provide technical guidance on the green taxonomy. Third, seven ministries of the Chinese government published the Guiding Opinions on the Green Financial System in August 2016, which laid the foundation for the green taxonomy in China ( Peng et al., 2018 ). In addition, the PBOC issued the first Chinese green finance standards, i.e., the Guidelines on Environmental Information Disclosure for Financial Institutions (JR/T 0227–2021) and Environmental Equity Financing Tool (JR/T 0228–2021) , contributing to the classification of environmental equity financing instruments and green investment procedures. However, inconsistent definitions and a taxonomy of green finance potentially have a negative influence on the international cooperation of green projects, making it difficult to guide public and private investment in all green properties; moreover, it increases the potential of international greenwashing behaviour resulting from asymmetric information ( Rado, 2019 ). Therefore, a unified green definition, along with a taxonomy, is needed for investors to identify adequate green properties.

As a growing financing tool that can assist in climate change mitigation and adaptation, green bonds have recently grown rapidly. They can successfully fund low-carbon infrastructure while mitigating and adapting to climate risks ( Sartzetakis, 2020 ). External assessment can increase the transparency of green bonds and their capacity for emission reduction ( Fatica and Panzica, 2021 ). In addition, some papers focus on the green bond market, including mechanisms ( Reboredo, 2018 ; Lee et al., 2021 ; MacAskill et al., 2021 ), connectedness with conventional markets ( Broadstock and Cheng, 2019 ; Dutta et al., 2020 ; Reboredo and Ugolini, 2020 ; Yahya et al., 2020 ; Gao et al., 2021 ; Pham, 2021 ), and investor attention ( Nanayakkara and Colombage, 2019 ; Pham and Huynh, 2020 ; Piñeiro-Chousa et al., 2021 ). Despite Sinha et al. ( Sinha et al., 2021 ) investigated the impact green bonds on social responsibility and environment at a global scenario, studies assessing the effectiveness of green bonds in carbon emission reduction and environment are still limited. This situation can be explained by inconsistent standards and non-transparent information ( Gibon et al., 2020 ).

The impact of green finance can be reflected in CO 2 emission reduction. Le et al. ( Le et al., 2020 ) took the perspective of financial inclusion and concluded that the development of inclusive finance will result in a reduction in CO 2 emissions. Nevertheless, Zahan and Chuanmin ( Zahan and Chuanmin, 2021 ) argue that green investment reduces carbon emissions in the long run and that the increased consumption of clean energy can have an environmental improvement effect. Additionally, high CO 2 emissions might have a detrimental influence on business financial indicators at the micro level ( Xu et al., 2020 ).

Moreover, the impact also conveys in other aspects. Green investment contributes to a rational redistribution of income, which provides benefits by increasing employment levels ( Banacloche et al., 2020 ), social welfare ( Glomsrød and Wei, 2018 ), and GDP growth ( Glomsrød and Wei, 2018 ; Banacloche et al., 2020 ). Studies have examined this relationship using quantitative methods at the national, regional and industry levels. Some researchers focus on the energy, environmental, and economic perspectives ( Ahmed et al., 2018 ; Cosmas et al., 2019 ; Wang et al., 2020 ; Ziolo et al., 2020 ; Gustafsson et al., 2022 ), while others introduce more influences, including industrial added value ( Batrancea et al., 2020 ), private sector and foreign investment, population, R&D, the human development index (HDI) ( Baek, 2016 ; Nawaz et al., 2021 ), and political issues ( Du et al., 2019 ).

4.5 Response

There are two broad financing mechanisms to reduce carbon dioxide emissions. One is carbon markets using market mechanisms; another is funding for carbon sequestration projects in developing countries, called REDD + Programme.

4.5.1 Carbon Market

Carbon markets are a means for the UNFCCC to address climate change using market mechanisms ( Michaelowa et al., 2019 ). The steady growth of the carbon trading market requires a solid pricing mechanism, and natural gas prices, oil prices, and natural gas and coal conversion prices all have a significant influence on the carbon price ( Boersen and Scholtens, 2014 ; Elie et al., 2019 ; Dutta et al., 2021 ; Yahya et al., 2021 ). Some references investigated the volatility of carbon prices and the linkage between carbon prices and energy prices in phases I, II and III of the European Union (EU) Emissions Trading Scheme (ETS) ( Gebara, 2013 ; Boersen and Scholtens, 2014 ; Michaelowa et al., 2019 ) as well as China’s National (CN) ETS plots ( Chang et al., 2019 ). Moreover, many studies discuss dilemmas associated with carbon markets, including market volatility as a result of structural and political issues ( Yu et al., 2015 ), the inefficiency of the carbon price as a result of market failure ( Ji et al., 2018 ), debt and power distribution issues ( Chevallier, 2009 ), and the clash with the environment ( Chu et al., 2020 ). Consequently, the development of carbon markets requires a concerted effort on the part of all stakeholders to normalize financial processes ( Chang et al., 2019 ).

Quantitative models are commonly used to assist governments in advancing market mechanisms and corporations in developing plans ( Tang et al., 2020 ). A considerable number of models have been adopted for carbon market research, including optimization models ( Yoshino et al., 2010 ; Jiang et al., 2016 ), simulation models ( Lin and Jia, 2018 ), statistical models ( Chang et al., 2017 ; Liu et al., 2018 ), and assessment models ( Zhang et al., 2017 ). In addition, coupling different models can optimize the related studies. For example, Tang et al. ( Tang et al., 2020 ) mention that the integration of artificial intelligence (AI) models and statistical models can improve the accuracy of the interpretability of carbon market research. Chai et al. and Chen et al.( Chai et al., 2020 ; Chen et al., 2021 ) use support vector machine (SVM) and particle swarm optimization (PSO) techniques, respectively, to forecast carbon prices, helping investors and risk managers in their decision-making. Therefore, future research should balance adequate models for carbon market-related research.

Furthermore, research on CN ETS will be a potential topic. In July 2021, China officially launched its carbon trading market after the 10-years pilots in seven provinces. The market is initially focusing on the electric power industry, and the time at which other sectors are incorporated in what order should be considered ( Karplus, 2021 ). One of the key characteristics of the carbon market is the carbon emission allowance, which limits the annual carbon emissions of a corporation. How to incorporate fairness ( Wiedenhofer et al., 2017 ), efficiency ( Wu et al., 2020 ), and uncertainty ( Ye et al., 2017 ; O’ Ryan et al., 2019 ) into the allocation holds significance for the carbon market. Another dimension of CN ETS is the policy design. From the perspective of global practices, carbon market policies usually evolve from simple to complex and from flexible to strict. As CN ETS is in its initial stage, the government should learn from the world’s advanced practices and explore adequate policies that suit China’s national conditions, including carbon pricing, transactions, performance assessments, etc.

4.5.2 REDD + Programme

Forests are the greatest carbon sinks in terrestrial ecosystems, and their protection can help lower greenhouse gas concentrations in the atmosphere and moderate global warming. During the 11th Conference of the Parties to the United Nations Framework Convention on Climate Change (COP11) in 2005, REDD + projects started. In relation to donee countries, developing areas are compensated for reducing deforestation and forest degradation through REDD + projects ( Norman and Nakhooda, 2015 ; Turnhout et al., 2017 ). As one of the most significant carbon sink projects in the world, numerous studies verifying the forest carbon stocks in various locations and analysing the costs and benefits of projects have been carried out ( Peskett et al., 2011 ; Graham et al., 2016 ). For example, Ravikumar et al. ( Ravikumar et al., 2017 ) estimated the benefits of carbon financing under various land use scenarios in Peru, Indonesia, Tanzania, and Mexico. On the other hand, as for donor countries, both the public (e.g., United Nations Development Programme (UNDP), Food and Agriculture Organization (FAO)) and private (e.g., local REDD + initiatives) sectors can be sources of financing for REDD+ ( Parker et al., 2009 ). The private sector is gradually playing a more imperative role in REDD+, and it is predicted to provide more funding than the public sector in the future ( Miah and Aturo, 2021 ). Carbon transfer payments are one of the methods for distributing private funds, but the selling price of carbon offsets is low and unstable because of the voluntary market ( Meza et al., 2021 ). This situation results in a small share of carbon transfer payments. Simonet et al. ( Simonet et al., 2014 ) investigated 410 global REDD + projects and found that only 16% of funding comes from carbon offset transactions. Another issue is the unequal distribution of funds and benefits ( Gebara, 2013 ; Guerra and Moutinho, 2020 ). Therefore, future research should pay attention to the transmission pathways underlying the effect of deforestation, as well as quantitative evaluation methods for examining the fairness and effectiveness of REDD + policy implementation.

REDD + plays an important part in carbon emission reduction and biodiversity enhancement. The community forest programmes in Guatemala’s Mayan Biosphere Reserve (MBR) have been found to offset approximately 1 million tons of CO 2 equivalent per year ( Hodgdon et al., 2013 ), while the Norway-Guyana REDD + project successfully decreased deforestation by 35%, averting 12.8 million tons of CO2 emissions ( Roopsind et al., 2019 ). Abram et al. ( Abram et al., 2016 ) examined the financial feasibility of converting common forest trees to oil palm in Malaysia and discovered that the cost of reducing emissions ranged between $9 and $75 per ton. Most researchers believe that carbon funding will benefit forest initiatives. More importantly, the REDD + projects have a number of significant benefits, including ecosystem services and biodiversity enhancement. ( Jantz et al., 2014 ). The multiple effects of REDD + need to be examined ( Alusiola et al., 2021 ). The decrease in agricultural land will raise the price of crops, exacerbating food scarcity ( Huettner, 2012 ; Loaiza et al., 2015 ). Meanwhile, REDD + tends to change the previous rules of community forests and does not accommodate changes in the local social and economic environment ( Hajjar et al., 2021 ). Future research should concentrate on the impact of REDD + on community forests and how to prioritize community forests ( Bayrak and Marafa, 2016 ).

5 Conclusion

Green finance provides an important supporting tool for carbon emission reduction or other green projects, and the sustainable ecological and environmental development has become an indispensable target of green finance. Our study takes green finance and carbon emission reduction as its theme and searches for literature in the Web of Science core database to conduct a bibliometric analysis of studies published between 2011 and 2021. We summarize the status, trends and hotspots of the related research and clarify the challenges and future research, which will help to study green finance and carbon emission reduction in more depth. However, limitation exists where the articles selected for analysis are basically from WoS database, despite the quality of articles are guaranteed, the quantity of papers is relatively low. Different databases could be comprised to strengthen the representativeness of results. Moreover, besides using DPSIR framework in classifying the articles, it is also useful classify the articles characteristic based on methodological choices and research contexts, which can shed light on the trends of research characteristics and benefit the scholars working in the area ( Kumar et al., 2022 ). Finally, the major conclusions of this study are as follow.

1) Between 2011 and 2018, there were a small number of related studies, growing from 17 in 2011 to 40 in 2018. Between 2018 and 2020, the number of studies increased considerably, from 57 in 2019 to 92 in 2020. We expect that the total number of studies in the future will be higher than the number of papers published in 2020.

2) Developed countries and regions such as North America, Europe, and Australia produced the most studies because of their great economic strength and well-established research institutes. Some developing countries, such as China and India, have made significant contributions to this field. Emerging regions, such as South Asia and South America, contain a significant quantity of forest carbon sinks and emphasize research supported through REDD + programmes. Moreover, the United Kingdom, the United States, and Canada published studies early, while China, Germany, and Australia published studies later. In terms of institutions, Oxford University published the largest number of papers, and most of the top institutions were from developed countries, while China also made contributions.

3) The top three journals in terms of the article count were Climate Policy, Journal of Cleaner Production, and Energy Policy, which together accounted for 21.9% of all papers. The top research area was ecological and environmental sciences, followed by business and economics, other topics in science and technology, energy and fuels, engineering, and public administration.

4) The collaboration analysis shows that the majority of academics cooperated with fewer than three authors. Professor Irene Monasterolo of the Vienna University of Economics and Business published the most articles in the field. Her research directions include climate stress testing, the evaluation of climate risk and financial risk, and the EIRIN stock-flow consistent behavioural model.

5) The keyword analysis finds that “climate change” had the greatest frequency and centrality. It was followed by keywords such as “policy”, “energy”, “impact”, “economic growth”, and “long-term”. The analysis of the temporal evolution of keywords demonstrates that the trend of research evolved from exploring policies to exploring the efficiency and environmental protection effect of green finance. Furthermore, the trend has updated with the emergence of new energy sources and financing mechanisms.

6) Burstiness can reflect the frontiers in a specified period. We find that “clean development mechanism”, “adaptation”, “carbon market”, and “sequestration” were typically high-interest topics for a long period. “CO 2 emissions”, “green finance”, and “green bond” have become more popular, as they appeared in 2019 and continue into the present. The hotspots of references include global blue carbon estimation and impact, private capital for addressing climate change, and the current status and concerns of green finance.

7) The DPSIR framework is feasible and apprehensible in constructing a holistic picture of current research. We apply the framework in clustering articles about green finance and carbon emission reduction. We divide the articles into: driving forces, state, pressure, impact and response, and identify current research topic, limitations and future research.

Through the above analysis, the research on green finance and carbon emission reduction is gradually gaining the attention of the academic community, and the future research direction in this field might focus on the following issues: Incorporating climate factors into assessing the effectiveness of green finance projects and policies, quantitively analyse the risk from the business perspective; Constructing a unifying green definition and taxonomy in identifying green properties for investors; Balancing adequate models for carbon market-related research; Transmission pathways underlying the effect of deforestation; Quantitative evaluation methods for examining the fairness and effectiveness of REDD + policy implementation as well as the impact and priority level of community forests.

Meanwhile, the policy implication of this article is profound. Firstly, in the wake of the surging growth of green finance, the discrepancy of green standards between nations and sectors is apparent, leading to latent threats such as greenwashing behaviors, governments should communicate and collaborate with one another, and international organisations (such as the United Nations) could play a proactive role in encouraging the implementation of related policies to reconcile the green taxonomies globally. Secondly, the cooperation network of authors shows that a majority of researchers study separately, however, some environmental issues are in the position at the global level, particularly for carbon sequestration projects such as REDD+, which involves the participation of both donor and donee countries. In order to enhance mutual understanding and promote the development of green finance, more international projects are encouraged to be set up to boost the collaboration of researchers from different countries. Finally, with the establishment of carbon neutrality goals in numerous countries, emerging carbon markets continue to grow. In this scenario, governments should utilise fiscal and monetary measures to ensure that the emerging carbon market functions effectively, and the market mechanism is also required to stimulate vitality.

At present, the COVID-19 pandemic has caused a global economic crisis, and many countries are using green finance to revive their economy and move it towards sustainable development. Specifically, the EU 2021–2027 long-term budget coupled with Next Generation EU (NGEU) will provide a total of 2.018 trillion euros for green development and digital transformation. In addition, as an important country for the implementation of carbon emission reduction, China has used a range of financial instruments to reduce its carbon emissions, especially the recent national carbon emission trading market. We hope that our work provides a systematic review of green finance for carbon emission reduction to boost the research in this field, especially under the recovery from the COVID-19 pandemic and for the construction of sustainable societies.

Data Availability Statement

The raw data supporting the conclusion of this article will be made available by the authors, without undue reservation.

Author Contributions

ZZ: Writing-original draft, Methodology, Software and Data curation, Visualization. YL: Conceptualization, Supervision, Validation, Reviewing and Editing. ZH and XL: Formal analysis, Validation, Reviewing and Editing.

This work was supported by the National Natural Science Foundation of China (42071287), National College Students Innovation and Entrepreneurship Training Program of Shandong (S202110427038), College students Innovative Entrepreneurial Training Plan Program of University of Jinan (SXB20200050), as well as Construction of the peak discipline of applied economics (JNSX2021011).

Conflict of Interest

The authors declare that the research was conducted in the absence of any commercial or financial relationships that could be construed as a potential conflict of interest.

Publisher’s Note

All claims expressed in this article are solely those of the authors and do not necessarily represent those of their affiliated organizations, or those of the publisher, the editors and the reviewers. Any product that may be evaluated in this article, or claim that may be made by its manufacturer, is not guaranteed or endorsed by the publisher.

Acknowledgments

We are grateful for the support and assistance we received from Jianshu Lv. We thank the reviewers for their valuable comments and suggestions.

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Keywords: green finance, carbon emission, citespace, knowledge map, bibliometric analysis, DPSIR framework

Citation: Zhang Z, Liu Y, Han Z and Liao X (2022) Green Finance and Carbon Emission Reduction: A Bibliometric Analysis and Systematic Review. Front. Environ. Sci. 10:929250. doi: 10.3389/fenvs.2022.929250

Received: 26 April 2022; Accepted: 12 May 2022; Published: 30 June 2022.

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Copyright © 2022 Zhang, Liu, Han and Liao. This is an open-access article distributed under the terms of the Creative Commons Attribution License (CC BY). The use, distribution or reproduction in other forums is permitted, provided the original author(s) and the copyright owner(s) are credited and that the original publication in this journal is cited, in accordance with accepted academic practice. No use, distribution or reproduction is permitted which does not comply with these terms.

*Correspondence: Yang Liu, [email protected] , [email protected]

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A Thematic Study of Green Finance with Special Reference to Polluting Companies: A Review and Future Direction

• Published: 23 May 2023
• Volume 10 , article number  24 , ( 2023 )

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• Akhil Pasupuleti 1 &
• Lakshmana Rao Ayyagari 1  

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The objective of the study was to understand the phenomenon of green finance in polluting companies through a systematic literature review. The methodology involves the search, selection, classification, and categorization of thirty-five articles on green finance in polluting companies which were analyzed for the time span of eleven years, i.e., 2011–2022. The outcome of the review identified the following five themes: (i) green credit and environmental protection; (ii) green finance and green innovation; (iii) green innovation and environmental protection; (iv) green finance and investment; and (v) green innovation and firm performance. The review has put forward recommendations for further advancement in policy strengthening and the utilization of extensive data analysis, indicating potential avenues for future research and development. The findings of the study provide insights to researchers, practitioners, and policymakers about the status of green finance in polluting companies.

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1 Introduction

Green finance is the arrangement of finance for environmentally sustainable projects (Wang and Zhi 2016 ). The core purpose of green finance is to promote the coordinated and sustainable development of economic and ecological benefits (Qi 2021 ). The goal of green finance is to coordinate financial and monetary resources and activities. This enables sustainable development to be accomplished with the least amount of harm to the environment and habitat (Wang et al. 2022 ). Due to China’s persistent advocacy for changing its economic development model, green financing has become a hot topic in the global financial community (Cao et al. 2021 ). The rise of green finance and climate finance are directly and indirectly related to sustainable developments (Bernabé et al. 2022 ). It is a financing method that prioritizes green projects that are helpful in mitigating the impact of climate change (Desalegn and Tangl 2022 ). It can well guide and adjust the investment of financial resources to green enterprises to obtain more credit resources than polluting enterprises (Cao et al. 2021 ).

Green finance refers to financial instruments, products, and services that are designed to support and promote sustainable economic growth and development (Yu et al. 2021 ). It is also a technique for macroeconomic regulation that focuses on sparse natural and environmental resources and can assist the government in efficiently allocating resources across the country to support steady economic growth (Ji et al. 2021 ). Green finance can include a range of financial instruments, such as green bonds, loans, green funds, and other sustainable financial products (Li et al. 2020 ). Environmentally friendly industries can be supported in their further development by green finance, which can direct economic and social resources in that direction (Gao et al. 2022 ).

Environmental issues such as global warming, climate change, and other environmental changes have occurred due to rising greenhouse gas emissions, and carbon dioxide emissions. Environmental issues were caused by economic development (Gilchrist et al. 2021 ) and gained serious attention of governments, scholars, and academicians (Zhou et al. 2021 ; Zhang et al. 2022 ) as this is threatening to human health and economic development (Shahzad et al. 2020 ). All these are closely related to natural resource consumption and the emission of pollutants from various industries. Amongst these environmental concerns, the major sources of pollutants emissions are polluting industries (Fan et al. 2020 ) which can trigger some serious problems for the environment. Polluting companies have to play an important role in the practice of environmental responsibility (Wang 2021 ; He et al. 2022 ).

Green finance refers to financial tools and investment practices that promote sustainable and environmentally friendly activities (Zheng et al. 2021 ). In the context of polluting companies, green finance can play an important role in promoting sustainability and reducing the negative impact of such companies on the environment (Wang 2021 ). One way of promoting green finance in polluting companies is to encourage them to invest in renewable energy, i.e., solar panels and wind turbines, and clean technology ((Zhang et al. 2021a ). The introduction of environmental regulations is another way of promoting green finance in the polluting companies which require to reduce their carbon footprint and harmful environmental impacts (Wang et al. 2021a , b ). By incorporating environmental, social, and governance (ESG) considerations into their investment choices, investors can significantly contribute to the promotion of green finance in polluting businesses (Hachenberg and Schiereck 2018 ). Finally, green finance for technological innovation is one other way of financing to the polluting companies, which can help in the pollution emission reduction and energy saving ((Zhang et al. 2021a ).

In this study, the authors strive to focus on the impacts of green finance in polluting companies. This study analyzed 35 previous studies on prominence of green finance in polluting companies and offers a comprehensive assessment from year 2011 to 2022. The term green finance was first proposed by the United Nations Environment Programmee Finance Initiatives (UNEP FI) in 2007. Next, in the same year China has issued green credit guidelines by the China Banking Regulatory Commission (CBRC) with People’s Bank of China (PBC). In addition, there was a first paper published on green finance in polluting companies in 2011 by Zhang et al. ( 2011 ) followed by few studies that have contributed significantly in this field. (Wang et al. 2020 , 2021a , b ; (Liu et al. 2021a ; Kang et al. 2020 ; Huang and Zhang 2021 ; He et al. 2022 )

While conducting this research the authors found scant literature in this area. Akomea-Frimpong et al. ( 2021 ) analyzed 46 studies on green finance in banks and found several themes. Some of the review papers have studied different areas like study of green finance in buildings (Debrah et al. 2022 ; Shabu and Vasanthagopal 2021 ). Despite these studies, no other studies have been reported in the literature that carried out systematic literature review on green finance in polluting companies. Hence the objective of the study is to understand the phenomenon of green finance in polluting companies through a systematic literature review. The present study proposed five different themes under the framework of green finance and suggested future directions. The findings of the study provide insights to researchers, practitioners, and policymakers about the status of green finance in polluting companies. The following research questions were tried to be addressed: (1) How can the literature on green finance in polluting companies be allocated in focused themes? (2) What are the future opportunities available for green finance in polluting companies?

2 Methodology

This study used a scoping review methodology to examine the status of quo and future needs of green finance in polluting companies. This section is completed with the data retrieval process, extraction, and synthesis.

2.1 Data Retrieval Process

The study adopts a two-stage process (Moher et al. 2009 ) for retrieving and selecting relevant papers, such as an initial search and selection of papers. Moher et al. ( 2009 ) used the two-part search process for retrieving and selecting relevant papers. An initial search, followed by the selection and approval of pertinent articles, makes up the two-stage search procedure. The following is a methodological explanation of how this works.

2.1.1 Initial Search

For the systematic review, papers were collected mostly from the Scopus database along with other databases such as Web of Science and Google Scholar. Both perform similar tasks for literature search, but Scopus is user-friendly and highly used in a literature survey, as it provides a comprehensive range of literature highly recommended sources (Desalegn and Tangl 2022 ).

After database selection, the keywords selection was the next foremost step, in which, the study finalized the keywords based on the definitions from prior literature. Although these keywords were the focus of this study, it was vital to cover all keywords in a single study (Debrah et al. 2022 ). Possible keywords for sample selection were green finance or green financing; green finance and polluting companies; climate or climate finance or carbon finance; sustainability or sustainable finance or sustainable financing or green fund; and green credit or green financing or green innovation. The final sample was restricted, and these keywords should have been either in the title or in the abstract or in the keywords. Moreover, these samples should have been articulated in English and published in journals from 2011 to 2022. A total of 163 papers were identified in the search process. Figure  1 explains the process flow of the selection.

2.1.2 Selection of Studies

The researcher first read each sample by the titles, abstracts, and keywords independently because the final sample was suitable (i.e., met the eligibility criteria) to the aim of the study. A total of 35 studies were identified from the 163 studies for further analysis.

Flow chart of the study selection process

2.2 Data Extraction

We meticulously extracted data from each study and entered it into a Microsoft Excel spreadsheet. Title, author names, journal information, year, purpose, aims, variables, and techniques were just a few of the different pieces of information that were extracted. By evaluating the studies thesis and anti-thesis, results are descriptively synthesized. The Medley reference management was utilized to make sure that all citations and supporting materials were appropriately tracked throughout the procedure.

2.3 Data Synthesis

This review outlines the scope of ‘Green finance on polluting companies’ research and development. The status quote was investigated by examining the main themes and keywords and focusing on the selected reviewed studies. Additionally, promising areas for the future scope of research were identified and analyzed. Moreover, the differences between academic and grey literature were identified and evaluated to inform the next generation of research and development about the prominence of green finance on polluting companies.

3 Results and Discussion

3.1 publication trend analysis.

Figure  2 presents the number of publications over the sample period of 2011 to 2022. This study has chosen existing studies on ‘green finance on polluting companies’ that are prominently available and are published in this chosen time frame. Also, this concept gained global prominence during this period. The study found a sudden rise in the green finance trend from 2019. A steady rise in the increase of studies leaves green finance a pressing topic among scholars; 2020 year alone has 9 studies which lead to 10 additional studies in 2021. Although green finance gained significant popularity during these years, it still cannot manifest its significance (Hu et al. 2021 ).

Year wise publication track from 2011–2022

3.1.1 Most Productive Journals Publishing Green Finance Topics

This study used 30 research papers that appeared in 19 journals. To identify the journals where green researchers published more frequently, Table  1 presents journals where a minimum of two relevant articles were published. Sustainability (Switzerland) and Journal of Cleaner Production (United Kingdom), Environmental Science and Pollution Research, International Journal of Research in Public Health, PloS ONE, Journal of Environment and Development, The Science of the Total Environment, and Environmental Management are the leading journals amongst all. Among the relevant papers covered by the study, the data revealed that even though these journals published around 75% of the relevant papers, there is a strong focus on theoretical and practical aspects of green finance for polluting firms.

3.1.2 Paper Funding

Among the 30 studies, 9 were not funded by any organization or agency, the rest of the studies were funded by various agencies. This means there are funding agencies for green finance on polluting companies. Researchers in high-polluting companies should work with funding organizations, investors, the government, research institutions, and universities to support and pursue green finance.

3.1.3 Citation Analysis

Table  2 presents a short description of most cited papers on green finance on polluting companies. Citation analysis is important for evaluating the strength of an article and the impact that an article or work has when used by others in their work. Future research efforts can be guided by understanding the most popular articles on green finance of polluting corporations. Citation counts are based on all databases, i.e., Scopus, Google Scholar, and Web of Science. The article by Xie et al. ( 2019 ) is the most cited on the Green finance on polluting companies, followed by those by Cai et al. ( 2020 ), Dhar et al. ( 2022 ), Liu et al. ( 2017 ), and Hu et al. ( 2021 ) articles which that have 100 citations. The rest of the papers have less than 100 citations. It shows how recently polluting companies have been introduced to the green financing products that researchers and practitioners are creating throughout the globe.

3.1.4 Methodologies Used

From the relevant papers analyzed, existing studies on green finance used five dominant research methodologies. Most of the studies were done with secondary reports and quantitative studies. In total in this review, three major models were used more than 80%. Figure  3 shows the most used models, which include: regression model, Difference-in-Difference (DID), Difference-in-Difference in propensity score matching (PSM-DID). Only one study was conducted with the dynamic spatial model (Chen and Chen 2021 ), the Super-Slack based methods (Super-SBM) model (Zhou et al. 2021 ), and Vector auto regression-Data envelopment analysis model (VAR-DEA) (Gu et al. 2021 ).

Emphirical models presented in papers

3.2 Themes of Green Finance on Polluting Companies

This study has identified different themes of green finance on polluting companies and scope for future studies based on the selected studies. This has been divided into two parts for further discussion. Figure  4 presents the description of the themes. Green finance themes are presented along with major contributing articles and common keywords in Table  3 .

Themes of green finance of the study

3.2.1 Green Credit and Environmental Protection

With the smart allocation of credit resources, the green credit policy is a vital green financial tool that can achieve a win-win situation concerning both economic development and environmental protection (Wang et al. 2020 ). As a key part of environmental regulation, green credit attracts wide attention from academia and industry ((Liu et al. 2021b ). A section of the reviewed studies focused on the relationship between Green Finance and Environmental protection. It was found that Green finance has a positive effect on environmental sustainability (Huang and Zhang 2021 ), and this can create value for the firm (Kang et al. 2020 ). Usually, government enterprises are concerned about environmental protection, when compared with private organizations. This is an indication that green industries have more environmental concerns (Huang and Zhang 2021 ). Some other studies also found green finance negatively affects the environmental responsibility of firms (He et al. 2022 ).

3.2.2 Green Finance and Innovation

Broadly defined, green innovation refers to the innovation of green technology, which aims to save energy and reduce emissions and pollution (Hu et al. 2021 ). Green innovation fundamentally enhances product competitiveness and brings competitive advantages to enterprises (Wang et al. 2021a , b ). In this literature, we focus on innovation in high pollution industries. Studies have found that green innovation was positively affected by green finance (Hu et al. 2021 ; (Liu et al. 2021a ). Green Finance has a more favourable effect on Non State Owned Enterprises (NSOEs) green innovation than it does on state-owned businesses (SOEs), perhaps because of NSOEs tight ties to the government and likelihood of taking on additional environmental protection duties (Jiang et al. 2022 ). Direct environmental regulations positively affect green technology innovation (Cai et al. 2020 ). Green credit policy has a positive correlation with green innovation in high-polluting industries (Lu et al. 2022 ; Ling et al. 2020 ; Li and Zeng 2020 ). Longer temporal horizons can be considered in a future study on the innovation performance of high-polluting companies, which will incorporate the effects of the economic cycle into the empirical analysis.

3.2.3 Green Innovation and Environmental Protection

Firstly, enterprises can obtain government environmental protection and innovation subsidies with technological innovation, which in turn brings marketing profits of a product (Wang et al. 2021a , b ). Ownership of a company has a positive impact on environmental decisions. An owned enterprise cares more about environmental protection which has a focus on green innovation (Liu et al. 2021b ). By enhancing the environmental responsibility of manufacturing firms, corporate environmental responsibility also considerably increases its capacity for green technology innovation (Wang et al. 2021a , b ).

3.2.4 Green Finance and Investment

Several studies have found that there are investment opportunities for stakeholders through green finance in polluting companies. For example, Zhou et al. ( 2021 ) have studied the investment opportunities in high-polluting companies through green credit policy and found that green enterprises have found cheaper sources of funds. Investing in environmental projects needs long time to get returns. Green finance has a positive correlation with environmental investment (Ji et al. 2021 ). Although the application of green credit policy results in commercial banks restricting green financing for highly polluting firms (Zhang et al. 2022 ), there is a short-term financing effect of green credit policy on polluting companies (Cao et al. 2021 ). In the energy-intensive industries, the investment will reduce (Wang et al. 2020 ) and financing costs also reduce with the green credit policy (Liu et al. 2017 ). In the meantime, the implementation of the green credit policy and renewable energy investment will increase ((Zhang et al. 2021b ).

3.2.5 Green Innovation and Firm Performance

Green finance, which is an innovative financial product and includes green credit, green securities, green investment and carbon finance, can provide support for the development of the green innovation of polluting firms (Jiang et al. 2022 ). Past studies have focused on the relationship between green innovation and firm performance. Disclosing ESG data will attract stakeholders. Meanwhile, disclosing environmental information has a positive significant effect on green innovation (Cailou et al. 2021 ). Green process innovation has a positive impact on green product innovation, and both green process innovation and green product innovation can improve a firm’s financial performance (Wang et al. 2021a , b ). The impact of green financing is particularly pronounced for SOEs, large-scale businesses, organizations with a disproportionately high level of external monitoring, and businesses with a high degree of economic policy uncertainty (Yao et al. 2021 ).

3.3 Future Scope

This study has conducted a scoping review of published journals in the application of green finance in polluting companies. This research area has received less attention from academic research and the government. Firstly, this study identified that a trend in the research area shows that spike in the past few years (Fig.  2 ). In addition, our examination of journal publishing (Table  1 ) indicates that there is wide coverage of publications among the journals. By clustering articles with citation analysis, the study highlighted the major thematic areas in the field of green finance in polluting companies, which are:

Green credit and environmental protection.

Green finance and innovation.

Green innovation and environmental protection.

Green finance and investment.

Green innovation and firm performance.

Table  1 presents the most prestigious articles in all these thematic areas. We contended an in-depth examination of the content in these thematic areas which would affect valuable additions from a broader perspective.

3.3.1 Policy Improvement

Green finance policy is actively used in response to the changes of environmental improvement, and climate change (Zhou et al. 2021 ). These policies and their institutional context have important implications on firm outcomes ((Zhang et al. 2021b ). In 2012, China has launched the Green Credit Policy (Wang et al. 2020 ), and further studies should be carried out from the perspective of the government’s involvement (Cao et al. 2021 ). This policy requires mechanism strengthening (Ling et al. 2020 ; Ji et al. 2021 ). In addition, Industry division is required for the development of policy ((Zhang et al. 2021a ). The impact of additional green financial policies, such as green securities, green insurance, and green bonds, on the environmental governance of businesses should be examined in subsequent research (Hu et al. 2021 ).

3.3.2 Data for Further Studies

As an emerging topic, the majority of the studies were done with restrictions on data ((Liu et al. 2021a ; (Zhang et al. 2021a ). Literature was conducted concerning polluting companies so the availability of data about comprehensive corporate polluting emissions is not available (Cao et al. 2021 ). Most papers discussed green finance (Hu et al. 2021 ) and big data must be deployed to encourage the sharing of environmental information between governments and businesses (Wang et al. 2020 ). Moreover, future research requires more involvement from firms (He et al. 2022 ) and from different countries (Ji et al. 2021 ).

3.3.3 Multidisciplinary with Environment

Multidisciplinary studies that take into account the environment and the society consist another popular trend covering the dominant substrate impact mechanism of green finance on the environmental aspect (Zhang et al. 2022 ). In this respect, our results indicate that there is a scope for sustainable development (Dhar et al. 2022 ) with green finance. In this line, more research should be conducted in consideration of the COVID-19 pandemic (Xue and Zhang 2022 ), and environmental laws (Liu et al. 2021b ; Cai et al. 2020 ). In addition, we also observe that (a) despite its use in a variety of approaches, the economic and financial literature has a high level of indicator standardization; and (b) social indicators and features of sustainable development and operation have received less attention and are less standardized.

3.3.4 Others

Furthermore, in contrast to previous studies, we find that studies are needed from the banker’s perception ((Liu et al. 2021a ). Green finance will impact the performance of a company and for this Xie et al. ( 2019 ) have suggested that more variables should be used for further studies. This will impact financing for green industries (Chen and Chen 2021 ). Literature suggests the need for analysis of long-term data (Ling et al. 2020 ; (Wang et al. 2021a , b ).

4 Implications

Research focusing on green finance in polluting companies is scattered across numerous journals, and few studies have examined the current structure and future scope of research in the domain. To this end, this study offers the following theoretical contributions. Further, study should do a prestige analysis, which will show how often an article is cited in prestigious publications, to give readers a more thorough view of the significant pieces in the field.

4.1 Theoretical Implications

Firstly, the study uses co-word analysis to broadly classify keywords from the articles into three management domains: green credit, green innovation, and environmental management. This classification enhances understanding of the domains in which research on green innovation as a firm resource has concentrated over the years and, accordingly, suggests agendas for future research.

Second, the co-citation analysis reveals five major clusters with thematic areas: environmental protection, green innovation, investment opportunities, and firm performance. The number of papers contributed to each cluster yearly is shown in the dynamic co-citation analysis that followed, providing historical trends of papers produced on green innovation as a business resource. Finally, a thorough comprehension of the theme areas and directions for future research is provided by a content analysis of the prestigious publications in the four thematic clusters.

4.2 Practical Implications

Environmental protection is the main goal of polluting companies under corporate social responsibility. From this perspective, this study entails the following implications for practitioners.

First, the study finds that business strategy, energy saving, green credit, and innovation are the domains that research on green finance in polluting companies predominantly concentrated on. An indication of the direction of green finance in polluting companies can be found in the identification of these domains and their often-used keywords.

Second, the identification of the thematic areas environmental protection, green innovation, investment, and firm performance may guide decision-making by policymakers and practitioners alike. Thematic areas also highlight trends in current research and depict how sustainable development strategies have changed throughout time. All clusters are actively growing, albeit at varying paces.

5 Conclusions

This study reviewed the existing research on green finance in polluting companies to recognize research trends and knowledge gaps that can be filled in further study. The grey literature on green finance and academic databases have been mapped out in this scoping review theoretically on polluting companies. This paper has found the five themes of green financing of polluting companies and future scope for further studies. They should focus on policy improvement, with more data, multidisciplinary, and from the perception of bankers. Practically, this study serves as an ultramodern reference point for green finance in polluting companies. This research work identified certain research areas for better possible investment opportunities in green finance in polluting companies. Thus, the finding provides policymakers and practitioners with a framework for determining their level of preparedness towards adoption of green finance for polluting companies. Although this study offers important information regarding green financing of polluting companies, it has some drawbacks. The study is limited to years 2011 to 2022, and hence, not much review was provided before this. The study majorly considered articles from Scopus database that could have omitted some of the research works that were carried out in the other indexing sources. Based on the two authors’ consensus and the pre-established criteria for this study, they reviewed these studies, and there are indications that some studies that were excluded may be pertinent to the subject under discussion. Last, the literature search was based on a limited set of terms that may not accurately represent the scope of the study. More keywords may be used in future evaluations. Yet this research in the field of green finance especially contributes to the betterment of the environment and the sustainability in the industry.

Data Availability

Data sharing is not applicable to this article as no datasets were generated or analyzed during the current study.

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Pasupuleti, A., Ayyagari, L.R. A Thematic Study of Green Finance with Special Reference to Polluting Companies: A Review and Future Direction. Environ. Process. 10 , 24 (2023). https://doi.org/10.1007/s40710-023-00642-x

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