The Role of Green Finance in Green Innovation: Global Perspective from 75 Developing Countries

Green finance provides an important impetus to green innovation and sustainable development. This study investigates the connection between green finance and green innovation using cross-country panel data that cover 75 developing countries from 2000 to 2019. First, we find that green finance significantly boosts the number of green patent applications in developing countries, which is crucial for promoting green development. Second, we divide countries according to whether they are members of the Regional Comprehensive Economic Partnership or the Belt and Road Initiative, and their environmental performance. Heterogeneity results show in countries with poor environmental performance, non-RCEP member countries, and non-BRI member countries that the contribution of green funding is more obvious and significant. Furthermore, we consider several cross-items to explore how green finance influences green innovation differently depending on the circumstance, such as the degree of corruption, political stability, and government effectiveness. Overall, our findings highlight the key role that green finance plays in advancing green innovation, particularly for emerging economies that urgently need a policy foundation for green innovation and sustainable development.