green finance research paper

• Open access
• 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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Green finance: past, present and future studies.

• MATTEO PALMACCIO , 
• GRAZIANA GALEONE , 
• MATILDA SHINI , and 
• FRANCESCO CAMPOBASSO

https://orcid.org/0000-0002-5468-0035

Department of Economics, Management and Business Law, University of Bari “Aldo Moro”, Bari, 70125, BA, Italy

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https://orcid.org/0000-0002-3233-1002

https://orcid.org/0000-0002-5073-7065

Department of Economics and Finance, University of Bari “Aldo Moro”, Bari, 70125, BA, Italy

The research consists of a systematic literature review (SLR) emphasizing scholars’ views on the topic of green finance. Seeking to provide a deep understanding of the state of the art, the paper aims to draft implications and insights to address future research. Studies on green finance are investigated using the Scopus database as a source to get access to the dataset. The methodological approach is inspired by Kraus et al. (2020) in order “ to identify, choose and critically appraise relevant pieces of research, and to generate collective insights of knowledge from past research ” (Loureiro et al. 2019).

• Green finance

1. Introduction

Traditional finance had as its goal the maximization of profit for its shareholders, without considering externalities that could harm the environment and society ( Tao et al.   2022 ). However, beginning in the 1970s, the first ideas about the importance of corporate social responsibility settled in. The growing interest of savers and financial investors around sustainability issues and the significant role of sustainable investments justifies the evolution of traditional finance to green finance, from shareholder-facing value creation to what we find in the triple bottom line, i.e. value creation for the benefit of society as a whole ( Friedman   2007 ).

The development of the concept of a sustainable financial system consists of a set of elements, approaches and decision-making mechanisms ( Schoenmaker   2017 ) that starts from maximizing shareholder value and profits over a short-term horizon and arrives at a stakeholder-facing model capable of creating not only financial value but also social and environmental values and contextually considering the returns associated with them. The financial system would prove capable of facilitating decision-making on the trade-offs between economic, social and environmental goals of sustainable development (Dimmelmeier et al. 2021).

Green finance can be understood broadly as “financing as well as related institutional and market arrangements that contribute to the achievement of strong, sustainable, balanced, and inclusive growth through direct and indirect support of the Sustainable Development Goals (SDGs) framework. In addition, green finance is concerned with the stability of the financial market and its overall efficiency.” ( Sustainable Finance Study Group   2018 ). It emerges how the concept of finance has gradually evolved to the point of incorporating ESG issues among investment objectives and in investment strategies. To meet the investment needs required to reconvert the production system, there is a need to mobilize private savings by directing them, through institutional investors (such as pension funds, insurance companies, investment companies, but also banks), toward the investments needed to reorient the economy toward sustainability goals.

To this end, in 2018, the Action Plan on Sustainable Finance was published by the European Commission. The Action Plan on Sustainable Finance provides for a series of actions — 10 to be exact — that aim, on the one hand, to encourage the allocation of private capital in sustainable investments, and on the other hand, to help financial market participants identify sustainability risks that may negatively impact their portfolios, as sustainability risk, and climate change risk in particular, has become a systematic and systemic risk. Clearly, financial products that do not take sustainability factors into account will encounter distribution difficulties in the future, where, as a result of the MiFID II amendment (another of the actions in the European Commission’s Plan), clients express preferences for ESG investments.

The evolution of society cannot be achieved without the support of finance and appropriate tools for its development ( Elheddad et al.   2021 ).

Regulation of the financial industry is adapting to the very rapid growth it has achieved, with the preparation of numerous initiatives to counter greenwashing and refine sustainability ratings, so as to produce greater transparency and reliable data, and manage risks of creating a bubble that could burst producing losses and financial instability ( Zhang   2022 ).

The main initiative put in place in this regard is the Sustainable Finance Disclosure Regulation (SFDR) adopted in November 2019 (Regulation 2019/2088 — SFDR) and the EU taxonomy adopted in June 2020 (EU Regulation 2020/852).

The goal of the Regulation is to expand and standardize the information provided to investors on ESG financial products, i.e. those investment products that consider environmental, social, and governance aspects. With this information, it should be easier for investors to compare different investment products and understand their level of sustainability.

The EU Taxonomy is the main starting point of the concrete implementation of the EU Sustainable Finance Action Plan to help investors identify opportunities offered by the energy transition and achieve sustainable investment goal and will form the basis of forthcoming regulations to be introduced.

Several studies address the topic of green finance (Zheng et al. 2019, Dervi et al.   2022 , Frimpong et al.   2022 , Wang et al.   2021a ), however, our contribution has a different implementation and offers a more accurate analysis. The study considers a time frame that includes the entry into force of two important legislative instruments for the development of the green finance: the SFDR and the EU taxonomy. In fact, we believe that this introduction will be instrumental in achieving a new model of inclusive and sustainable finance.

Given the increasing importance of the sustainability paradigm, we believe that its influence on the financial sector should be studied through a systematic approach. Therefore, the purpose of this paper is to critically review the literature on green finance. Thus, we applied the systematic literature review (SLR) ( Kraus et al.   2020 , Tranfield et al.   2003 ) using the Scopus database “to identify, choose and critically appraise relevant pieces of research, and to generate collective insights of knowledge from past research” ( Loureiro et al.   2019 ).

Therefore, we combined the keywords analysis and the content analysis to achieve adequate results and answer the following research questions ( Massaro et al.   2016 ):

Ensuring a transparent and high-quality process, our research team created a review protocol and searched the terms “Green Finance” or “green loan(s)” or “climate transition risk” and “financial(s)” or “climate change risk” and “financial(s)” when they appeared either in the title, abstract or keywords of the studies. The search has been undertaken on the Scopus (Elsevier) database. The research team has included only research papers as documents to search, published in an international peer-reviewed journal, written in English, and published between 2012 and 2023.

The analysis starts from 2012 as the Sustainable and Responsible Investment has been booming for a number of years around the world and between 2012 and 2018, the value of assets managed by European “responsible” mutual funds doubled from 250 billion to 500 billion euros ( Climate Bond Initiative   2019 )

Proceeding papers, book chapters, book reviews, meeting abstracts, theses, interviews, and any kind of studies not written in English, have been excluded from the examination. We limited the investigation to the areas of Business, Management and Accounting and Economics, Econometrics and Finance. The result was based on 89 research papers connected to the aim of this SLR.

We develop a longitudinal study analysis on ten years (2012–2023) as the relevant period of analysis. Our systematic review of the literature emphasizes scholars’ views on the role of green finance, green loans, and climate change/transition risk. Our key findings outline significant streams of study of green finance: the importance of fostering green investments, the role of financial institutions, the proposition of models and the impact of carbon taxes on order financing.

Another important evidence is the even lower presence of empirical work when considering finance journals in the current “state of the art” of the topic.

This paper is organized as follows. Section  2 proposes our methodology. Section  3 outlines the results. Section  4 outlines the implications of the SLR. Lastly, Sec.  5 presents the conclusions and future research aims.

2. Methodology

Intending to build an integrated and up-to-date definition of green finance, the research consists of a SLR based on Tranfield et al. ( 2003 ) and Kraus et al. ( 2020 ) approaches. The choice to perform an SLR, instead of a “traditional literature review” ( Kraus et al.   2020 , p. 3), is driven by the willingness to provide a standalone view on the topic, avoiding biases by the research team’s members ( Okoli   2015 ). Indeed, we did not aim to build a narrative methodology to support any pre-defined hypothesis. We believe that the SLR approach is the best standalone way to create evidence on the topic; in fact, “ SLR offers the possibility of combining existing literature and create solid definitions and foundations for future research ” ( Kraus et al.   2020 , p. 2).

Within an SLR, the research team deals with existing publications by following a systematic methodology implemented to synthesize knowledge coming from published contributions ( Tranfield et al.   2003 ). Such methodology needs a pre-defined process to analyze literature in a reproducible manner. As Kraus et al. ( 2020 , p. 10) point out, scholars provided several process models, varying in the number of stages and steps ( Tranfield et al.   2003 , Frank & Hatak   2014 , Okoli   2015 , Pittaway et al.   2014 , Secundo et al.   2020 ). Nevertheless, each model claims the same main steps:

Such protocol ensures the exact execution of the established method. In the following sections, the four stages of the SLR are resumed.

2.1. Stage 1: Planning the review

2.1.1. identify the need.

The decision to conduct a SLR focused on the topic of green finance is supported by several reasons. First, according to the research conducted by the research team, there are limited studies that conduct a bibliometric analysis on the topic of green finance (Zheng et al. 2019; Dervi et al.   2022 ; Frimpong et al.   2022 ; Wang et al.   2021a ); however, our contribution has a different implementation and offers a more accurate analysis. Indeed, the study considers a time frame that includes the entry into force of two important legislative instruments for sustainable investment development: the SFDR and the EU taxonomy.

Both normative interventions are the result of intensive “regulatory” aimed at directing financial operators toward integrating sustainability risks within their processes investment and advisory processes while also strengthening information transparency to end clients.

Second, given the growing importance of the sustainability paradigm, we believe that its influence on the financial sector should be studied through a systematic approach. Third, such analysis could be useful in addressing future studies.

2.1.2. Review protocol

Ensuring a transparent and high-quality process, our research team created a review protocol and searched the terms “Green Finance” or “green loan(s)” or “climate transition risk” and “financial(s)” or “climate change risk”, and “financial(s)” when they appeared either in the title, abstract or keywords of the studies. The search has been undertaken on the Scopus (Elsevier) database that is considered reliable for a comprehensive study; moreover, Scopus is also a Journal indexing database and is more common for searches of citations and references and appears to be more accepted than other databases. The research team has included only research papers as documents to search, published in an international peer-reviewed journal, written in English, and published in between 2012 and 2023. We have chosen such a timeframe because according to Scopus, 2012 is the first year of expansion of published contributions on green finance. Proceeding papers, book chapters, book reviews, meeting abstracts, theses, interviews, and any kind of studies not written in English, have been excluded from the examination. We limited the investigation to the areas of Business, Management and Accounting and Economics, Econometrics and Finance . The result was based on 203 research papers connected to the aim of this SLR.

2.2. Stage 2: Identification and evaluation of studies

From the database of 203 research papers, we screened titles, keywords, and abstracts of retrieved results, to understand the best connection with our research aims. This step of the research has been developed through a database implemented on an excel file spreadsheet. The appraisal consisted of five phases to obtain a valid, reliable, and applicable database:

To achieve the maximum level of reliability, such a phase has been separately conducted by each member of the research team. The review is restricted to peer-reviewed papers, regarded as validated knowledge, and most likely to have the highest impact in the field of knowledge. The review process does not base the selection on journal rankings as we do not wish to exclude new and relevant studies published in less established journals ( Loureiro et al.   2019 , p. 3).

After a comparison of the results of each member, the team approved the final database. Thus, we assumed 89 research papers as adjusted sources for the SLR, defining this research stream as an immature field (in full expansion). Kraus et al. ( 2020 , pp. 15–16) argued the advantages from an immature field: “ In a less mature field, the number of available papers is limited and more scattered as a lot of research questions remain unanswered. At this point, an SLR can help to establish a new theory based on existing papers ( Frank & Hatak   2014 ). Another reason to conduct an SLR in an immature field is to point out missing data and call for empirical research at the right point of time (Petticrew & Roberts 2006) ”.

2.3. Stage 3: Extracting and synthesizing data

2.3.1. data extraction.

To perform the data extraction, we built a research list in the Scopus database including the 89 research papers (Table 1 ) arising from the previous stage. Then, we extracted the comma-separated values (CSV) file in excel format as a basis to perform the next step of the stage. The CSV excel file provides — for each research paper — the following information:

2.3.2. Data synthesis

We present the synthesis of data by providing several descriptive bibliometric analyses ( Secundo et al.   2020 ) and adopting VOSviewer software (Van Eck and Waltman 2014) to provide keywords and content analysis. Our bibliometric analysis by VOSviewer is mainly based on cluster analysis using the co-occurrence of keywords, citations of documents, and bibliographic coupling.

2.4. Stage 4: Dissemination of results

Our SLR provides an accurate background on green finance, providing the state of the art and valuable insights ( Kraus et al.   2020 ) to advance studies in the business, management, and financial fields (Lombardi et al. 2020b). While Secs.  4 and  5 disseminate the results of our analysis by answering our RQ, Sec. 6 provides a discussion of results and concluding remarks.

3.1. Performance analysis

In this section, we propose our results answering RQ 1 and RQ 2 and providing a descriptive and bibliometric analysis of the papers. Our descriptive analysis started with the distribution of the 203 research papers referred to the areas of Business, Management and Accounting and Economics, Econometrics and Finance during the time and among countries, providing a deep understanding of literature trends. Papers have a consistently increasing trend from 2017 — from 1 paper in 2016 to 100 papers in 2022 — that points out the nature of an immature field (in full expansion). The growing trend over the two-year period 2021–2022 (Fig. 1 ) coincides with the time frame in which the European Commission has adopted a set of measures to encourage capital flows to sustainable activities throughout the European Union in order to direct investor interest toward more sustainable technologies and businesses (SFRD and EU Taxonomy).

Fig. 1. Documents per year.

Fonte: Scopus.

The research papers distribution, assuming the author’s affiliation countries (Fig. 2 ), is mainly concentrated on advanced countries. China is located at the top of the list (105 research papers). Pakistan (17 research papers), Malaysia (16 research papers) and France (14 research papers) follow.

Fig. 2. Documents by country or territory.

Table  2 shows the number of citations per journal, Table  3 offers for each of the twenty papers the number of citations per author/document and citations per year (CPY).

Thus, the most interesting research papers and influential authors are Taghizadeh-Hesary & Yoshino ( 2019 ), Zhang et al. (2015), Dafermos et al. ( 2017 ), Falcone et al. ( 2018 ) and Ng ( 2018 ). The trend of citations and CPY is aligned to this author list following a decreasing trend in numbers. All the five research papers are by authors coming from diverse countries and are published in journals of several fields (interdisciplinary, finance, technological and environmental issues). Particularly, Taghizadeh-Hesary & Yoshino ( 2019 ), aiming to induce private participation in green finance and investment, propose two applied frameworks, backed by theoretical models on green finance and investment based on project size. Moreover, the paper explores the idea of making use of technological features of Distributed Ledger Technologies (DLTs), such as blockchain technology to reduce risks associated with green investments. DLTs enable an expansion of the investor pool to community-based green trust funds, especially for small green energy projects (e.g. solar and wind).

Zhang et al. (2015), focusing on the large attention that green finance received in the literature and on the absence of consensus on the definition among researchers, propose a brief review of the recent advances in green finance research. The paper consists of a bibliometric analysis approach to summarize the status quo and development trends of green finance to assist in establishing a solid conceptual base and guidance to future research directions. Dafermos et al. ( 2017 ), develop a stock-flow-fund ecological macroeconomic model that combines the stock-flow consistent approach of Godley & Lavoie ( 2007 ) with the flow-fund model of Georgescu-Roegen ( 1976 ). Simulations are conducted to investigate the trajectories of key environmental, macroeconomic, and financial variables under (i) different assumptions about the sensitivity of economic activity to the leverage ratio of firms and (ii) different types of green finance policies.

Falcone et al. ( 2018 ) examine the use of language and depict the emerging storylines surrounding green finance to identify actors pushing the Italian financial sector to become increasingly greener. The paper scrutinizes the narratives used by landscape actors to assess the channels through which such pressure is exerted, as well as its effectiveness. The findings reveal a high/unbalanced narrative pressure coming from global actors by means of both institutional and informal channels, and from national actors mainly by means of informal channels. The study aims to support decision-makers in developing specific strategies to unlock the huge potential of GF in the transition process towards a greener economy by: (i) supporting a deeper strategic collaboration among informal and institutional actors operating at the national level; (ii) acting as catalysts of green-oriented financial initiatives and related dissemination, and (iii) re-addressing the national-institutional actors towards a more proactive role in fostering finance for green innovation. Ng ( 2018 ) explores the phenomenon of the adoption of sustainability accounting, sustainable financing and relevant regulatory measures for the development of a green financing system in an emerging global financial center under the influence of sustainable global development. Adopting a multiple-case study approach, the paper reveals three cases of sizable, listed enterprises notable for their heterogeneous approaches to embracing risk governance, sustainable accounting and financing in their issuance of green bonds. Finally, a theoretical framework is proposed over the mutually reinforcing effects of legitimate policy and market-based finance that engender the convergence of a green financing system.

3.2. Science mapping

We performed the occurrence analysis by identifying the most relevant keywords in the 89 research papers analyzed. Table  4 presents these keywords, each of which has a minimum of five occurrences: sustainable development, finance, climate change and green bonds are the prominent keywords that frequently emerge when investigating and answering our RQs.

We investigated all keyword clusters by examining the co-occurrence of all keywords, choosing five as the minimal number of keyword occurrences; 11 keywords met this threshold. We adopted the full counting method without weighing the authors. Figure  3 shows the results. The VOSviewer co-occurrence analysis generates links between key terms. As shown in Fig.  3 , lines connect the different terms, and the strength of the links indicates the number of publications in which two terms occur together; thicker lines indicate a stronger link ( Kirby   2023 ).

Fig. 3. All keywords occurrence.

Table  4 shows the group of keywords occurrence identifying three clusters. We identify cluster 1 with five items adopting the red color and cluster 2 with three items adopting the green color. Interestingly, results emphasize two main research streams following the main pillars of the topic of green finance: on the one hand, climate change, green economy, investment, and sustainability and on the other hand the connection with finance and investments. Therefore, cluster 1 seems to assume the prominent role of green finance for climate change and environmental issues while cluster 2 emphasizes the financial soul of the topic. Cluster 3 seems strictly connected with cluster 2. Our cluster analysis is mainly developed by determining the bibliographic coupling clusters assuming both (i) more than five items (citations) and (ii) the full counting method to achieve results. We emphasize the presence of two main clusters (Fig.  4 ): cluster 1 (red color) and cluster 2 (green color).

Fig. 4. Cluster grouping items (per document).

Table  5 presents information pertaining to clusters 1, 2, and 3.

The research papers in cluster 1 mainly focus on the importance of fostering green investments and on the role of financial institutions in the diffusion of green finance instruments; more in deep:

In the second cluster, there is still a relevant focus on the importance of fostering green investments and on the role of financial institutions for the diffusion of green finance instruments; more in deep:

4. Implications of the SLR

This section answers RQ3 by providing implications and insights of the SLR. The publication trend and the number of published papers define such a stream as an immature field (in full expansion) ( Kraus et al.   2020 , pp. 1037–1038); consequently, many research questions remain unanswered. However, the SLR also reveals a scarce presence of papers providing empirical evidence, a fact that is probably associated with the lack of public data on the financial instruments related to green finance policies; anyway, the stream would benefit from empirical research (Petticrew & Roberts 2006). As the SLR is approaching an immature field ( Kraus et al.   2020 , p. 1038) it can suggest research questions and try to speculate research hypotheses.

The cluster analysis reveals that scholars mainly focused on the importance of fostering green investments and on the role of financial institutions ( Falcone et al.   2018 , D’Orazio & Popoyan   2019 , Raberto et al.   2019 , D’Orazio & Valente   2019 ) as well as on the proposition of models ( Dafermos et al.   2017 ) and on the impact of carbon taxes on order financing ( Wang et al.   2021b ).

The SLR revealed that green finance has been largely investigated through a conceptual or qualitative explorative approach; indeed, we have found a limited presence of empirical works ( Jin & Han   2018 ). This means that even if green finance must be considered an immature field (in full expansion) ( Kraus et al.   2020 , pp. 1037–1038) scholars did not aim to provide statistical generalizations, but they considered it more important to offer theoretical explanations to be applied to similar cases (Yin 2014, p. 48). At the current state of the art, the research stream seems only formed by contributions implemented according to a normative view.

Both normative interventions are the result of intensive “regulatory” aimed at directing financial operators toward integrating sustainability risks within their processes investment and advisory processes while also strengthening information transparency to end clients. The EU Taxonomy is the main starting point of the concrete implementation of the EU Sustainable Finance Action Plan to help investors identify opportunities offered by the energy transition and achieve sustainable investment goal and will form the basis of forthcoming regulations to be introduced.

Hence, future contributions should point out issues and disadvantages of green finance policies and practices.

5. Conclusions and Future Agenda

This paper critically reviews the literature on the topic of green finance. We applied the SLR ( Kraus et al.   2020 , Tranfield et al.   2003 ) using the Scopus database “ to identify, choose and critically appraise relevant pieces of research, and to generate collective insights of knowledge from past research ” ( Loureiro et al.   2019 ). We combined the keywords analysis and content analysis to achieve adequate results. Proposing a longitudinal study analysis, our review of the literature emphasizes scholars’ view on the topic of green finance by extending the literature (Lombardi et al. 2019, Palmaccio et al. 2021). Several implications and insights are drafted, contributing to an immature field ( Kraus et al.   2020 , pp. 1037–1038).

Several studies address the topic of green finance (Zheng et al. 2019, Dervi et al.   2022 , Frimpong et al.   2022 , Wang et al.   2021b ), however, our contribution has a different implementation and offers a more accurate analysis. The study considers a time frame that includes the entry into force of two important legislative instruments for the development of the green finance: the SFDR and the EU taxonomy. In fact, we believe that this introduction will be instrumental in achieving a new model of inclusive and sustainable finance.

Beyond the need for empirical research to be done, we believe that there are three main avenues for future research arising from our SLR. Firstly, future studies should outline which industries have been more involved in the introduction of green finance instruments to understand which environment and operations conditions favor the green transition. Second, even if the modern managerial approach is focused on the equal consideration of stakeholders, investors appear as relevant actors in the green transition; therefore, a focus should be placed on how the green perspective is changing the interaction (practices) between companies and investors. Thirdly, having green finance the goal of increasing sustainability performances, empirical research should verify if such performances are increased by green finance instruments and practices.

Thus, we propose a research agenda inviting scholars to deeply investigate these topics under the following research questions:

Concerning the limitations of this research, the SLR has been conducted keeping in mind the inquisitiveness and ethical principles of quality and accuracy. Nevertheless, this paper is not exempt from limitations, which could be considered for further developments. First, this paper adopts one leading and renowned database of scientific papers; however, by employing other databases, findings might be diverse from ours. Second, even if green finance is an immature field, the number of research papers on the topic is in plain expansion and our future agenda is directed to answer the previous questions as well as to undertake a similar SLR to understand the evolution of the research topic, also considering the ongoing modifications depended on the introduction of the EU Taxonomy.

Authors’ Contribution

While the article is the result of a joint effort by the authors, the individual contributions are as follows: Matteo Plamccio wrote “Results”, Graziana Galeone wrote “Introduction”, Matilda Shini wrote “Methodology” and “Implication of the SLR” and Francesco Campobasso wrote “Conlusions and Future Agenda”.

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Received 13 April 2023 Revised 22 October 2023 Accepted 22 October 2023 Published: 18 December 2023

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Enabling green innovation quality through green finance credit allocation: evidence from chinese firms.

1. Introduction

2. theoretical analysis and research hypotheses, 2.1. green finance credit allocation and enterprises’ giq, 2.2. path analysis of green financial credit allocation affecting enterprises’ giq, 2.2.1. based on enterprise digitization level, 2.2.2. based on total factor productivity of enterprises, 2.2.3. based on the shadow banking of enterprises, 2.3. analysis of factors influencing the allocation of green financial credit to affect enterprises’ giq, 2.3.1. based on financial regulation, 2.3.2. based on local fintech development, 2.3.3. based on regional intellectual property protection, 3. research design, 3.1. sample selection and data sources, 3.2. model establishment and variable setting, 3.2.1. model establishment, 3.2.2. variable setting, 4. empirical analysis, 4.1. baseline regression, 4.2. robustness tests, 4.2.1. parallel trend test, 4.2.2. placebo test, 4.2.3. replacement of explanatory variables, 4.2.4. change in industry definition criteria, 4.2.5. tests based on the psm-did methodology, 4.2.6. the 2008 international financial crisis and the impact of omitted variables, 4.2.7. environmental pollution factors and replacement sample year intervals, 5. analysis of impact mechanisms, 5.1. mechanism testing based on digital transformation, 5.2. mechanism test based on total factor productivity of enterprises, 5.3. mechanism test based on shadow banking, 6. further discussion, 6.1. the impact of financial regulation, 6.2. the impact of financial technology, 6.3. the impact of intellectual property protection, 7. conclusions, policy recommendations and limitations, 7.1. conclusions, 7.2. policy recommendations, 7.3. limitations, author contributions, institutional review board statement, informed consent statement, data availability statement, conflicts of interest.

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Hao, L.; Deng, B.; Zhang, H. Enabling Green Innovation Quality through Green Finance Credit Allocation: Evidence from Chinese Firms. Sustainability 2024 , 16 , 7336. https://doi.org/10.3390/su16177336

Hao L, Deng B, Zhang H. Enabling Green Innovation Quality through Green Finance Credit Allocation: Evidence from Chinese Firms. Sustainability . 2024; 16(17):7336. https://doi.org/10.3390/su16177336

Hao, Liangfeng, Biyi Deng, and Haobo Zhang. 2024. "Enabling Green Innovation Quality through Green Finance Credit Allocation: Evidence from Chinese Firms" Sustainability 16, no. 17: 7336. https://doi.org/10.3390/su16177336

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The Green Transition and Public Finances

42 Pages Posted: 25 Aug 2024

Caterina Seghini

Swiss Finance Institute - University of Geneva; University of Geneva - Geneva Finance Research Institute (GFRI)

Stéphane Dées

Banque de France

As the world faces rising temperatures, extreme weather events and environmental disruption, the imperative to mitigate climate change has never been more pressing. Yet the pursuit of effective mitigation could threaten the sustainability of public debt due to the potentially huge fiscal costs of the associated policies. This paper uses a dynamic general equilibrium approach that takes into account the macroeconomic implications of the green transition and its consequences for public finances. It shows that when the government relies too heavily on expenditure-based measures, it threatens the sustainability of public debt, by increasing the probability of sovereign default, leading to higher interest rates on government bonds. This higher  public default risk has potentially significant repercussions on investment financing conditions for the private sector, and increases the cost of the transition to a net-zero economy. On the other hand, carbon pricing policies make the transition more viable for public finances, at the expenses of similarly high economic costs, while remaining effective in reducing greenhouse gas emissions. The welfare-maximizing optimal policy mix yields to a balanced approach, where the share of the mitigation effort undertaken by the public sector ranges from 25\% to 40\% between 2030 and 2050.

Keywords: Climate Change, Mitigation Policies, Environmental Taxes and Subsidies, Public Finances

Suggested Citation: Suggested Citation

Swiss Finance Institute - University of Geneva ( email )

Geneva Switzerland

University of Geneva - Geneva Finance Research Institute (GFRI) ( email )

40 Boulevard du Pont d'Arve Geneva 4, Geneva 1211 Switzerland

Stéphane Dées (Contact Author)

Banque de france ( email ).

Paris France

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Green finance in circular economy: a literature review

• Published: 17 May 2023
• Volume 26 , pages 16419–16459, ( 2024 )

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• Bhavesh Kumar 1 ,
• Love Kumar   ORCID: orcid.org/0000-0002-7287-4626 1 ,
• Avinash Kumar 3 , 2 ,
• Ramna Kumari 4 ,
• Uroosa Tagar 5 &
• Claudio Sassanelli 6  

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Developing markets are using sustainable development potential to reach zero-carbon goals. Due to the limitation of natural resources, companies need to use environmentally friendly manufacturing to develop a circular economy (CE). Green finance (GF) and the CE are linked in a systematic and complex approach; therefore, it was essential to employ the coupling coordination-level framework to explain their relationship and feedback. Any study linking green financing and CE together has been found. The objective of this research is to explore this twofold domain and determine its main characteristics. To address this objective, a comprehensive review of the literature was conducted, supplemented by a bibliometric analysis. The results confirm that GF has the potential to help society, sustainability, and the prevention to climate shifts, investing in the CE. There are many hurdles to overcome, including inadequate knowledge about CE and GF, ambiguous definitions, a lack of coherence between legal frameworks on CE and green financing, unclear laws, and a lack of financially viable motivation for investors and financial institutions that are ready to promote in sustainability. This study explores CE and GF domains. Managers may readily increase their understanding of methods, strategies, and technical solutions beneficial to assist their operations toward a green economy depending on various CE and GF elements. Finally, based on a categorization of GF types, the assessment identifies future investment potential consequences of green financing in the CE.

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1 Introduction

Our world is on track to break global climate change records in the twenty-first century (Jiang et al., 2023 ; Siegert et al., 2020 ). Over the past decade, there have been wide demands to ensure natural resources are used equitably to slow their rapid decline and prevent disastrous effects on future generations (Kapustkina, 2021 ; Kumar et al., 2023 ). According to research on monitoring the 2030 Sustainable Development Goals, the number 12 on sustainable consumption and production is critical to accomplishing several other linked goals (Campbell et al., 2019 ). The implications of a circular economy (CE) are wide-ranging and essential for reversing human-caused climate change (Dwivedi et al., 2023 ). CE, in line with Goal 12, is strictly related to the 3Rs (Reduce, Reuse, and Recycle) (Manoharan et al., 2022 ; Zhang et al., 2022 ), recently extended to 9 (adding Refuse, Rethink, Repair, Refurbish, Remanufacture and Repurpose) (European Commission, 2020 ). The idea of a CE acquired significant momentum among various countries, groups, lawmakers, academic institutions, research scholars, and businesses worldwide in the twenty-first century (Di Vaio et al., 2023a , 2023b , 2023c ; Merli et al., 2018 ). According to some studies, CE initiatives can help to reduce waste, maximize resource reuse, and ecosystems protection, resulting in a win–win scenario for businesses, the market, and the environment (Austin & Rahman, 2022 ; D’Adamo, 2022 ; Sassanelli et al., 2019 ). This lifecycle idea has developed over time, from specific businesses to the entire CE. The development of a CE is a necessary decision for achieving economic advancement and resource efficiency (Rodrigo-González et al., 2021 ). The current linear economic systems cannot be maintained without significant adjustments to existing patterns of production and consumption (Ikram, Sroufe, et al., 2021 ). The ecosystem, society, and business may all benefit from CE initiatives that use the 9 Rs as their primary approach (Acerbi et al., 2022 ; D’Adamo, 2022 ). The world needs an immediate implementation of a CE system that safeguards the planet and advances humanity (Garcés-Ayerbe et al., 2019 ). There will be large costs involved with the shift to a CE. These include public spending on green infrastructure, new product subsidies, research & development, and capital expenditures (Austin & Rahman, 2022 ). The link between finance and the CE’s growth is quite close. The industrial transformation of the CE requires market-oriented green financial assistance. The initial capital expenses and expected payback time are more responsive to additional financing emerging from green product innovation and green initiatives (Sepetis, 2022 ; Tagar et al., 2022 ).

The development of the CE is still in its early stages, and access to finance for the growth of the CE is very limited. This is primarily due to insufficient macroeconomic policy guidelines and economic venture, lacking economic sector building and financial institution development, a low percentage of capital market financing, and inadequate funding tool invention, all of which have hampered the advancement of the CE (Xiaofei, 2022 ; Yuan et al., 2020 ). Kumar et al. ( 2022 ); Wang and Zhi, ( 2016 ) define the green finance (GF) economy as “a financial gateway of resources for the protection of the environment and CE,” suggesting that the market economy would allocate resources to publicly appropriate economic development drivers through social investment. The debate, however, revolves around the necessity for a steady between environmental advantages and economic progress, with the balance rolling from one to the other when conditions (such as the World Financial Crisis) demand. Furthermore, the challenging development of a financial support and assurance framework for the growth of the CE has been limited by the poor economic climate and a lack of risk-compensating measures (Xiaofei, 2022 ). The CE can be classified into various levels, such as company manufacturing, industrial parks, towns, and regions, based on the area and range it includes, and each sector has its own unique financial requirements (Ikram, 2022 ; Sarmento et al., 2022 ). Recent articles have emphasized the potential and prospects of CE, GF, as well as the need to overcome various current obstacles and increase transparency by enforcing reporting, standardization, and refining definitions and metrics for circular activity (Dewick et al., 2020 ; Sarmento et al., 2022 ). This shows that the development of a CE may depend on conventional financing mechanisms, such as financial commitment and lending, but should increase money through numerous financial institutions at all stages and necessitate a portfolio expansion strategy.

In recent years, there has been a notable surge of interest among scholars from diverse research disciplines and countries in the research domains of GF and CE separately. The period spanning 2011 to 2022 witnessed a multi-fold increase in the number of research publications dedicated to GF and CE, underscoring their growing significance as research priorities (Akomea-Frimpong et al., 2022 ; Alcalde-Calonge et al., 2022 ). As such, it is critical to conduct a comprehensive review, analysis, and synthesis of the existing research at one place in these areas to gain a holistic understanding of the overall research context, findings, and prospects for defining future research trajectories maximizing the impact of combined GF and CE research across various domains.

Indeed, to encourage the development of a CE, it is essential to make full use of finance, which is a significant market-oriented resource. Finance not only manages funds but also improves the industrial supply chain, making it the backbone of the modern economy (Debrah et al., 2022 ). Finance represents an essential foundation for expanding the CE domain. Studies into the mechanisms behind the progress of GF and CE are important to the progress of the environmental sustainability, economy, and society. GF in CE offers a great opportunity to overcome the CE financing gaps. It may also help overcome the cost barrier to sustainability and CE. However, access to finance for the growth of the CE is limited, and there is a lack of risk-compensating measures. The recent surge of interest among scholars from diverse research disciplines and countries in the research domains of GF and CE underscores their growing significance as research priorities.

The primary motivation for carrying out this research is that the application of GF in CE represents a potential chance for filling the investment gap in the CE and overcoming green innovation cost obstacles. However, to enhance and support GF in CE among researchers, policymakers, and practitioners, a comprehensive review of their combined current state and future requirements is required. Previous research concentrated solely on GF or the CE. No research has provided a complete summary of GF in CE. As a result, the purpose of this research is to perform explore the twofold research context of GF in CE, answering the following research question: “What is the present status of GF in CE implementation, and what are the upcoming requirements and opportunities for its growth?”. The following research objectives are created to accomplish this goal:

to provide a comprehensive review and synthesis of existing literature on GF and CE, including the research context, findings, and prospects for future research,

to identify and analyze the key drivers, barriers, and opportunities for the development of a GF and CE,

to examine the potential of GF and CE as a means to achieve sustainable development, particularly in relation to sustainable consumption and production patterns.

to propose a research agenda for future studies on GF and CE, focusing on interdisciplinary and cross-sectoral approaches, and addressing emerging issues such as digitalization, innovation, and resilience.

to come up with suggestions for how to move the research forward and make the study more useful in practice.

The paper is structured as follows: Section  2 reports the research context. Section  3 explains the research method adopted. Section  4 shows the results obtained, and Sect.  5 discusses them. Finally, Sect.  6 concludes the paper.

2 Background and research context

This section defines all of the research's key concepts related to CE, circular supply chain, GF, and environmental finance in order to prepare for their collective study.

2.1 Circular economy

The recent times have heightened the sense of urgency and ambition surrounding the concept of the CE, which can be challenging to define precisely. However, this ambiguity has actually increased interest and engagement with the CE to date. Drawing on the DOI theory, this space for creativity and willingness to disrupt the status quo can foster greater dedication to extending and challenging current practices. In sum, CE programs highlight a range of objectives rooted in ongoing activities (Di Vaio et al., 2023a , 2023b , 2023c ). A widely accepted definition of the CE has been put forth by the Ellen MacArthur Foundation (EMF, 2013 ): “CE is one that is regenerative and restorative by structure and strives to keep products, elements, and substances at their largest value and price at all periods, differentiating between biological and technological phases.” According to Milios ( 2021 ) and Broten et al. ( 2004 ), business practices for the CE may be separated into two categories: those which boost reuse and extend life of product by maintenance, modifications, reproduction, and refurbishments, and those that recycle the resources from used products to build resources that are as good as new. The strategy should be focused on individuals of various ages and levels of education. Ownership provides a path to stewardship, and customers become users and producers. Remanufacturing and repairing worn-out items, buildings, and infrastructure in local workshops produce skilled employment. Former workers are a useful source of information. However, CE’s importance has just recently become more widely recognized. Old industrial techniques have gradually been replaced by closed-loop systems that are solely dedicated to integrating economic, ecological, and societal implications (Rosa et al., 2019 ). According to the D’Adamo ( 2019 ), CE model is required to construct a closed-loop cycle as a replacement of linear system. As a result, the meaning idea for both the environment and the economy must be demonstrated. Therefore, CE has also become an important field of academic research during the past ten years, as seen by the steep increase in the number of publications and journals covering this topic. Businesses are also starting to recognize the advantages of CE and its potential advantages for both themselves and their stakeholders (Taddei et al., 2022 ).

2.2 Circular supply chain

Undoubtedly, the theories of legitimacy and institutionalism have had a significant impact on the development of SDGs benchmarking (Colasante & D’Adamo, 2021 ). Today, cross-functional integration is necessary for accurately describing innovative processes and attaining harmony between economic and engineering endeavors (Koksharov et al., 2019 ). A circular supply chain has been defined from two different perspectives. According to the material perspective, a circular supply chain is one in which materials are continuously reused and recycled once they have reached the end of their useful lives and there are very few materials wastes overall (Taddei et al., 2022 ; Yousafzai et al., 2020 ). Others take a broader approach, considering circular supply chains, also known as C2C supply chains, as essential components of production systems. Such systems must close the material loop, generate no solid, liquid, or gaseous waste, minimize the use of hazardous chemicals, and rely exclusively on renewable energy sources (Genovese et al., 2017 ; Saccani et al., 2023 ). A definition of circular supply-chain management (CSCM) has only recently been found in the literature, despite the fact that the phrase “circular supply chain” was used in several researches to combine CE with SCM (Zhang et al., 2023 ). CSCM involves synchronizing forward and reverse supply chains through intentional business ecosystem interconnections to generate wealth from goods and services, by-products, and useful waste flows while promoting an organization's economic, cultural, and environmental sustainability (Farooque et al., 2022 ; Mishra et al., 2018 ; Nasir et al., 2017 ). Materials recovered by companies other than the original producers who are allowed to reuse them are included in open-loop SCs. For the purpose of recovering additional value, items are returned to the original producer through closed-loop supply chains (CLSCs). The latter, which builds on reverse logistics, includes recycling, remanufacturing, and utilization (Hussain & Malik, 2020 ). Gains related to both environmental and economic performance are produced via green supply chains, which include suppliers and customers to support environmental cooperation (Masi et al., 2017 ). Green supply chain management is defined as being environmentally friendly in terms of product design, raw selection of materials and purchasing, manufacturing, transportation, and post-sale activities (Hussain & Malik, 2020 ; Kazancoglu et al., 2018 ).

2.3 Green finance

In 2010, a group of 194 countries established the Green Climate Fund (GCF) to provide financial support for global greenhouse gas emission mitigation efforts (Amoah et al., 2022 ; Cui & Huang, 2017 ). The main objective of the fund was to promote and facilitate GF initiatives and raise awareness of the concept worldwide. Since its inception, the principles of the GCF and GF in general have been discussed at various forums, including the G-8 and G-20 summits and the United Nations General Assembly (Akomea-Frimpong et al., 2022 ). Moreover, sustainable private finance, also known as GF, has been recognized as an essential part of the United Nations' Sustainable Development Goals (SDGs) 16 and 17 (Li et al., 2023 ).

However, what defines “green finance” is an issue of contention between many researchers and reputable institutions globally (Li et al., 2023 ; Patterson et al., 2021 ). While some authors contend that GF is the same as sustainable finance (or green bond or green investment) based on utilization and context, others disagree (Hafner et al., 2020 ; Migliorelli & Philippe Dessertine, 2019 ). The best approach to enhance the volume of financial flows (banking, microcredit, insurance, and investment) from the government, commercial, and non-profit sectors in order to support SDGs is through the use of GF. As a result, GF is important to accomplishing the goal of SDGs that take into account green economy (Ahmad et al., 2022 ; Campiglio, 2016 ). Therefore, inclusive green growth may be achieved through accessible GF, as inclusive GF aids in reducing the negative effects of climate change and fostering adaptability. Financial institutions are required to promote green goods in savings, credit, insurance, transfers of money, and modern electronic delivery channels in order to offer those funds essential help to people navigating an unpredictable climate. Consequently, overall investment strategy should change to be more environmentally friendly, as it will help to achieve the UN SDGs, especially SDG 1 (no poverty), SDG 7 (affordable and clean energy), and SDG 13 (climate action), all of which are designed to promote green growth. Bank lending is especially notable among such for two primary reasons (Ahmad et al., 2022 ). First, the most frequent source of external financing for businesses is bank loans (Chen et al., 2022 ; Guo et al., 2022 ). For example, the total amount of bank lending to British firms in 2013 was roughly three times the total amount of corporate bond issuance and more than 10 times the total value of public equity (Hussein & Hamdan, 2020 ). By providing funding to businesses that are prepared to take positive environmental action, or “green economy,” GF seeks to increase the financial sector's contribution to environmental protection (Kumar et al., 2022 ). Recent years have seen as rise in the use of green financing as a strategy for addressing environmental problems (Desalegn & Tangl, 2022 ). The effectiveness of green financing in addressing current environmental problems, however, is still challenging since there is still uncertainty about how to fulfill the green investment gap, which has been found to be rather large.

3 Research methodology

This study is based on a systematic literature review (SLR). SLR is an useful method for evaluating development in a research subject and developing a new research (Corona et al., 2019 ; Desalegn & Tangl, 2022 ; Tranfield et al., 2003 ), and it is a scientific, transparent, and replicable process (Di Vaio et al., 2022a , 2022b ). The SLR analysis supports the development of the proposed theoretical structure on CE and GF. This analysis aims to contribute to the advancement of the literature in this area (Paul & Criado, 2020 ). SLR has the following advantages over other types of reviews: (a) a higher standard of the method and outcomes (Leonidou et al., 2017 ); (b) bias reduction (Di Vaio et al., 2022a , 2022b ); (c) more reliability because the steps taken by the authors can be replicated (Wang & Chugh, 2014 ); (d) a concise outline of the research area examined (Di Vaio, Hassan, et al., 2023 ); and (e) the presentation of the foundations on which author can develop and share new conceptual model (Di Vaio et al., 2022a , 2022b ; Di Vaio, Latif, et al., 2023 ). An integrated qualitative approach was used in this research.

To conduct a comprehensive analysis of the various studies relevant to the topics of interest of this research, bibliometric reviews were employed, utilizing statistical tools to gain a thorough understanding of current trends, methodologies, journals, countries, particular subjects, and concepts that were important to our research. Following the study method shown in Fig.  1 , a complete assessment of the literature was done (Kumar et al., 2022 ; Jabbour et al., 2020 ), following the same procedure of multiple previous researches. Given the abundance of literature on GF and CE, it was crucial to limit the scope of research to only relevant literature. A systematic approach (Ren et al., 2019 ) was employed, which involved defining research goals, developing search strategies, identifying appropriate keywords, language, sorting and excluding literature based on pre-defined criteria, and categorizing relevant literature for analysis.

Flowchart explaining the methodology followed for the literature review

The research design has been structured in five primary steps, following the protocol established in the prior systematic literature review. The steps of the literature review were described in detail below.

In the first step, search strings have been used and defined with the combination of keywords, language, and year. The keywords for this literature review were constrained to GF system and CE. In the first step, search strings have been used and defined with the combination of keywords, language, and year. The keywords for this literature review were “Green finance”, “Circular economy”, “Sustainability”, and “Green innovation”. Furthermore, various researchers have different definitions for the phrase “green finance”. On the other hand, the definitions’ scope and content are comparable. The process of keyword selection was conducted through a focus group comprising of five researchers who work in the field of GF and CE. Furthermore, the validity of the search query was determined by comparing the selected keywords with additional terms utilized in the respective papers identified in the initial list. The analysis of keyword frequency demonstrated the importance of a specific keyword “Green bonds”, “Green credit”, “Environmental finance”, “Climate finance”, “Green loans”, “Sustainable production”, “Carbon finance”, “Green climate fund”, and “Funds for environmental initiatives”. Information was gathered from different databases, including ScienceDirect, Scopus, and Google Scholar (Ren et al., 2019 ). The relationship between the GF and CE was properly taken into account when conducting this literature review. To ensure the consistency and quality of the data studied, it was decided to only include peer-reviewed literature on the topic of GF and CE and find the link between these, although there were many valuable case studies, reports and articles by non-governmental organizations, companies, and governments on this topic. We decided for this approach for two main reasons: first, to focus on the current and state-of-the-art scientific research in the field of GF and CE; and second, to avoid the risk of potential biases or conflicting interests that could be present in non-scientific sources because non-scientific data may be prone to share success stories, instead than application failures. However, it was acknowledged that even scientific literature can sometimes present a biased view of the topic (Bjornbet et al., 2021 ; Diaz Lopez et al., 2019 ).

In the second step of this study, the scope of the review was limited to English language literature published between 2011 and 2022. It corresponds to the Identification step in PRISMA (Fig.  1 ) (Di Vaio, Hassan, Chhabra, et al., 2022 ; Di Vaio et al., 2022a , 2022b ; Di Vaio, Hassan, et al., 2023 ; Di Vaio, Latif, et al., 2023 ; Martin et al., 2021 ). The focus of these literature review was limited to CE and GF concept. The second and third steps involve Screening (inclusion or exclusion) and eligibility checks (check whether it corresponds with the research question or objective). Initial search provided the 286 papers in academic data search (Fig.  1 ). The publications were selected based on their suitability for the review goals and question after doing the content analysis of the abstract and conclusion. Using the second and third step of PRISMA (Di Vaio, Hassan, Chhabra, et al., 2022 ; Di Vaio, Hassan, et al., 2023 ; Kumar et al., 2022 ), 130 articles were selected for the comprehensive review.

The fourth step consisted in an analysis of contributions to detect links, constraints, and restraints of GF in CE for the selected articles/documents (using the last step of PRISMA). The data collected from the stated sources were organized in Microsoft Excel (Perkhofer et al., 2019 ). In the fifth step, JMP Pro and OriginLab Pro softwares were used to generate maps, graphs, and visualizations (Betancourt-Rodríguez et al., 2023 ; Schwebach et al., 2022 ) (Appendix A. script).

4 Main findings

This section first provides a descriptive analysis of the literature selected and then investigates and defines the dimensions of the GF in CE twofold domain, also listing the types of GF tools that could be employed to support its fully adoption. Finally, it provides the key components of the domain analyses to define interactions among them.

4.1 Descriptive assessment

The analysis articles' chronological order is shown in Fig.  2 . It demonstrates a rise in articles that deal with CE and GF after 2016. It was observed that trend of CE has increased from 2017 and GF after 2019. The major article on CE (2425) was published in year 2021 and the GF (418) was in 2022. Yu et al. ( 2014 ) give a summary of the history of industrial cooperation and identify two phases in its growth. The authors note a development in theoretical development about CE and CE-related studies over the period of (2006–2012). However, the researchers point out that prior to this time (1997–2005), industrial symbiosis (IS) research work was confined to the evaluation of sustainable and environment park projects, the development of waste recycling and treatment networks, and the idea of industrial symbiosis (Yu et al., 2014 ). Whereas GF is discussed previously in Sect.  2.3 , this result might be attributed to the fact that “GF” did not start becoming mainstream until after the year 2010. The number of research that were conducted from 2011 to 2022 is shown in Fig.  2 . It has a tendency of fluctuations, and there has been no consistent rise since 2011 to 2019 (Debrah et al., 2022 ). There were a number of 'ups and downs,' and more curiously, there was only one research paper in certain years, including 2014. It is possible that throughout these years, the popularity of environmentally friendly financing had not yet considerably shown itself in environmentally friendly structures. The biggest number of research was published in 2021 and 2022, although the total was still very low. The number of studies published in 2022 is projected to increase toward the end of the year. The outcomes of the investigation led to several observations that were rather noteworthy.

Yearly publication on topic of circular economy and green finance

Further research has been carried out in order to identify patterns of geographic occurrence in the literature; Figs.  3 and 4 show the publication on CE and GF. Figure  3 demonstrates that a many studies on CE was carried out by the European authors in particular Italy (1313), UK (1080) and Spain (974). In this search, it was also found that China and USA were the next with the highest number of publications with 775 and 654. In light of this, the Delft University of Technology and Technical University of Denmark has been reported the most disseminated one since the author of most of publications was affiliated to this school (Fig.  6 ).

Countrywide publication on circular economy (2011–2022)

Countrywide publication on green finance (2011–2022)

In terms of GF (the second major theme of this study) studies countrywide, in our literature review, we have not found major interest of authors in this topic. However, the research's findings include several intriguing insights that GF is gaining interest by authors to explore more in recent years. We have found Asia with major contribution, China (434), Pakistan (47), Malaysia (38), and India (39). Furthermore, other nations with large populations have demonstrated a great dedication to the field of study, including UK (51), Germany (28), and USA (25) (Fig.  4 ). In this regard, the major institutions were from China Jiangsu University, Wuhan University, and Beijing Institute of Technology (Fig.  6 ).

4.2 Research on the nexus of green finance and circular economy

GF, CE, and green revolution have emerged as research hotspots in finance and environmental research in the face of increasing serious ecological impact and environmental destruction. A portion of the literature recognizes that CE and GF were not two separate ecosystems, but rather have a connection in which they encourage and influence one another (Linnenluecke et al., 2016 ; Xiaofei, 2022 ). As a result, academics begin to merge CE and GF in order to validate the connection between the two functions. Others agreed that green financing may foster green initiatives from a variety of perspectives such as CE (Lewandowski, 2016 ; Orman, 2015 ). Green financial instruments, like green bonds and insurance, boost public participation into green industrial sectors and drive cleaner production innovation (Fernando et al., 2019 ). A diverse green financial system may improve CE efficiency and lead to the development of new green financial products (Chemmanur & Fulghieri, 2014 ; Fernando et al., 2019 ; Gilbert & Lihuan Zhou, 2017 ). According to Sachs et al. ( 2019 ), financial institutions were more keen in fossil fuel projects than in ecofriendly efforts, partly considering green investments have a lower return on investment than fossil fuel investments and were subject to future uncertainty. Two recommendations were made by Taghizadeh-Hesary and Yoshino, ( 2019 ), on how to increase business participation in green investments. Developing initiatives to provide data on green credit is the first proposal. The second idea is to provide to shareholders a portion of the tax revenue that was initially generated as a consequence of the positive ripple effect of providing clean energy. They think these two methods can increase their return on investment while reducing the risk associated with green initiatives.

There has been no single study on Nexus, but some authors had carried out study in subareas of CE such as Battiston et al. ( 2020 ) investigate the Austrian green financing industry. They forecast that yearly development in Austria's green economy would reach EUR 17 billion between 2021 and 2030. They believe that state funding is insufficient and that commercial resources should be organized to support sustainable (or environmental) initiatives. They also contend that green financing will be a significant step toward reaching this aim. They admit several existing flaws in Austria's financial sector. They believe that the Austrian industry for sustainable financial services is immature by worldwide standards, that mutual funds control it, and that institutional investors drive it rather than private companies. They also point out that client awareness of sustainable financial solutions is currently low in Austria. According to Battiston et al., ( 2020 ; Rasoulinezhad and Taghizadeh-Hesary, ( 2022 ); and Ren et al., ( 2020 ), there is no connection among GF, ecofriendly energy usage, and energy efficiency in the short term due to factors such as undesirable political associations, exogenous shocks, and financial systems. As a result, the research of causal relationships is both instructive and useful to legislators. Some governments, however, significantly promote the growth of the green financing sector. The top ten economies that promote GF, USA, Norway, Hong Kong, UK, Canada, New Zealand, Denmark, Sweden, Japan, and Switzerland that qualify as “Green Leaders” have had significant economic development, increased urbanization, reduced CO2 footprints, and increased the share of renewable energy usage to their overall energy usage (Saeed Meo & Karim, 2021 ). However, many research studies have shown that green financing has a favorable influence on environmental sustainability (Flaherty et al., 2017 ; Zhou & Cui, 2019 ). According to Wang and Zhi ( 2016 ), GF is important for properly controlling negative impacts on the environment and optimizing ecological and economic reserves. Ng ( 2018 ) GF is an economic action that supports green improvement, improves material use, and responds to climate change. In contrast to traditional finance, GF promotes environmental preservation, sustainable industry, and sustainable growth (Falcone & Sica, 2019 ; Kang et al., 2019 ; Zhou & Cui, 2019 ). In Zhou and Cui ( 2019 ), GF improves the environment and boosts an industry's corporate social responsibility. More finance for environmental protection, as well as financial tools particularly created for climate-friendly initiatives, can contribute in the achievement of ecological, social, and governance (ESG) targets (Tolliver et al., 2019 ). Furthermore, green credit may provide economic help for national SD if it meets with environmental standards (An et al., 2021 ).

GF laws might place variability on enterprises' relief; resources companies are vulnerable to financial limits, which will facilitate companies' financial flows by limiting R&D spending for sustainability practices (Yu et al., 2021 ). Chang et al. ( 2019 ) demonstrated that the current financial institution's economic markets are incapable of meeting the need for sustainable innovation. Limited GF availability and interest rates may hinder company engagement in financial help for sustainability practices. Overall, there are several works on GF and sustainable development that give further information and motivation for this study. Figure  5 displays the papers published on the connections between the CE and GF. We have not found many publications but limited from China (5), France (3), and Italy (2). Because of the small number of studies that have been done so far in this, the results suggest that this is a developing, relatively young study topic with significant potential for future work. Future research in this area should help practitioners and policymakers make the most of funding opportunities and encourage the CE as a means of addressing environmental problems like climate change (Fig. 6 ).

Countrywide publication on cross theme (green finance and circular economy)

Top 10 institutions

4.2.1 Methodological characteristics of green finance in circular economy research

The methodological features of the research that have been evaluated range in terms of the techniques used for analysis and data collection. Prior research has used survey questionnaires, consultations, qualitative document or document analyses, review of literature, case studies, archival/statistical data, and hybrid approaches to collect data. The most frequent approach, employed in research, is reports, which include published articles, qualitative document analysis, and research studies. Archival/statistical data, survey questionnaires, and interviews were the main approaches with research published in scientific databases. Di Maio et al. ( 2017 ) conducted research on assessing CE and resource efficiency using market value method; the resource efficiency of numerous Dutch sectors was assessed using the novel technique and contrasted with a conventional mass-based technique using standard industry data from Statistical Netherlands. Various techniques were employed for data processing after data gathering. The observations were divided into five categories based on the methods used to analyze the data: (1) statistical analysis (or descriptive statistics), (2) qualitative examination (content or report analysis), (3) econometric examination, (4) hybrid analysis and (5) computational analysis (including artificial intelligence (AI) processes) (An & Pivo, 2020 ; Di Maio & Rem, 2015a , 2015b ; Liu et al., 2021 ; Zhang et al., 2020 ). Liu et al. ( 2021 ) measured the total element rate of the sustainable economy and the progress of GF using the epsilon-based measure model and the entropy approach. In China, they conducted research on the long-term connections between environmental regulation, GF, and green total factor productivity. They discovered in their research that green financing does play a big part in fostering high-quality economic growth, where industrial structure modernization and technology innovation both play a portion of the intermediary function. A study on green revolution countermeasures of strengthening the CE to GF under big data demonstrates that the ecofriendly innovation is considerably encouraged by the regression coefficients of green financing, environmental legislation, and their relationship, which were 0.1598, 0.0541, and 0.1763, respectively. Accessibility, higher education, and per capita gross domestic product had regression coefficients of 0.0361, 0.0819, and 0.0686, respectively, which might considerably encourage green initiatives (Yaoteng & Xin, 2022 ). Pan et al. ( 2022 ), in their study, sought to determine whether investors seek a risk premium for enterprises transitioning to low-emissions operations in nations where high polluters from natural resource-related companies have strong market dominance. Between 2011 and 2020, they employed a time-series selection of enterprises from six GCC nations to integrate an emission-based risk component into the standard asset pricing methodology. According to their results, carbon pollution is consistently valued in stock market returns. As a result, investors will need greater incentive to include low polluters in their investments to compensate for more polluting but dominant businesses, resulting in an increased cost of capital for green enterprises. We have not found a cross field research on CE in GB or GB in CE. There is a need of research study in two of the study areas, GF-in-CE barriers and drives, and CE-in-GF solutions and patterns.

4.2.2 The circular economy and its financing

Making the transition from the linear economy to the CE demands modifications in four essential components: materials and product development, marketing strategies, organizational structures, global reverse networks and enablers (AlAhbabi & Nobanee, 2020 ). Moreover, numerous resource efficiency efforts by insurance and banking companies are emerging in reaction, including peer-to-peer financing, zero-waste, repurpose, product leasing, remanufacturing, and reverse manufacturing (Dewick et al., 2020 ). It is necessary to make the transition to a new “circular” approach based on “Reduce, Reuse, and Recycle” of materials, which enables one to “close the loop” in the operation of financial systems and offers advantages to the economy and the environment at many levels of assessment (Ghisetti & Montresor, 2020 ). These progressions imply that governments and the financial sector are more devoted than ever to supporting CE initiatives, with the European Investment Bank's (EIB) pledge to invest EUR 10 billion (USD 12 billion) by 2023 as part of the Partnership Initiative CE by method of loans, equity investments, assurances, and the creation of creative financing structures for both public and private initiatives serving as an especially notable example (Lewandowski, 2016 ; Linder & Williander, 2017 ; Stahel, 2012 ). Furthermore, Intesa Sanpaolo introduced the CE Plafond, a financial instrument designed to aid in the shift to a CE. Within the 2018–2021 Business Plan, the CE Plafond, containing of € 5 billion (recently increased to € 6 billion), is committed to the most innovative firms or initiatives in the CE area among all Italian and international market. The corporation recently issued a third Green Bond with an asset value of €1.25 billion, which will be used to fund green mortgages for the development or acquisition of energy-efficient houses (Ghisetti & Montresor, 2020 ; Heshmati, 2017 ; Patrick & Jan, 2021 ).

Recent articles have underlined the rise and potential of CE financing, but also the need to remove various current hurdles, improve openness by regulating transparency and standardization, and clarify terms and measurements for circular operations (Dewick et al., 2020 ; Ghisetti & Montresor, 2020 ; Hussein & Hamdan, 2020 ). Moreover, methods, techniques, and tools for social sustainability initiatives must be integrated in emerging frameworks, analytic concepts, and standards of CE financial instruments (Heshmati, 2017 ; Patrick & Jan, 2021 ). These initiatives are actual, present, and rising, and they have been warmly welcomed by supporters of a CE (Bhandari et al., 2019 ). We take advantage of this chance to take a step back and deliver a more measured, critical, and remedial review. From our vantage point, we must ask if these projects are motivated by a genuine commitment to sustainability, and how our idea of a CE is developing as new sets of stakeholders interact to shape the narrative (Dewick et al., 2020 ; Heshmati, 2017 ). What are the chances that viable resource efficiency concepts will be properly integrated in common company models? As countries seek to recover from the effects of the COVID-19 epidemic, the CE provides an appealing route ahead. With governments announcing millions of dollars in stimulation financing in response to the pandemic's economic and health effects, we have arrived at a critical juncture in utilizing forward-thinking public investments and incentivizing private investments toward a healthier, more adaptable, low-carbon CE approach (Ellen MacArthur Foundation, 2021 ).

Although CE financing is growing and the industry has an excellent interest, most enterprises currently lack sufficient funding (Lv et al., 2021 ). Furthermore, opportunities for SMEs to obtain venture funding and loans during the beginning and early growth phases can be very limited in comparison with the options open to existing organizations needing financial support for larger projects, such as changing their existing processes and supply chains (Linder & Williander, 2017 ; Linnenluecke et al., 2016 ). Corporate expenditure on the CE has risen in contrast to investment funding. Just Economics' working paper includes projections for corporate investment in CE techniques across a broad range of industries covering consumables (clothing and fabrics, technology), construction, transportation, food and drinks, agricultural, and nonspecific wastes (Dewick et al., 2020 ; Hussein & Hamdan, 2020 ). These areas contribute for the greatest rates of both pollution and resource consumption; housing, mobility, and food alone account for 70% of life cycle pollution (Mngumi et al., 2022 ; Muganyi et al., 2021 ). Despite rapid growth in the percentage of circular spending, it is still outpaced by linear expenses. Concerning the proposition types of GF papers are presenting strong connection with CE components such as technological innovation, environmental compliance, economic development, and industrial structure upscaling (Table 1 ). Furthermore, finding of this paper shows that not every paper writes about the financial resources needed to meet the CE concepts. A number of contributions are devoted to highlighting creative initiatives in maintaining circular economies, adding GF and big data analytics, assisting businesses in digitalizing inventory activities and traceability, and securing the efficiency and efficiency of the CE and GF (Clark et al., 2018 ; George et al., 2015 ; Soundarrajan & Vivek, 2016 ; Zhou et al., 2020 ).

4.2.3 Green finance and circular economy concepts

Sustainable finance and investment (SFI), on the one hand, finances to promoting long-term sustainable global development (Cunha et al., 2021 ) and climate financing funds climate change adaptation and mitigation projects (Ram Bhandary et al., 2021 ; Steckel et al., 2017 ). GF, on the other hand, covers primarily environmental financing and all other economic products and services focused on a larger number of environmental goals, such as 3Rs, industrial pollution management, and natural resource and ecosystem protection (Debrah et al., 2022 ; Dewick et al., 2020 ; Xiaofei, 2022 ). According to Zhang et al. ( 2019 ), financial development is an important determinant of CE future advancement. The Green Climate Fund (GCF) was formed in 2010 by 194 nations with the goal of providing financial assistance to developing countries in order to reduce GHG emissions and prepare for climate change. Since then, the phrase “GF” has featured regularly in publications by global groups and national governments. Academics have also paid close attention to relevant topics. GF, on the other hand, remains poorly defined and is frequently confused with sustainable and climate financing. Some researchers studied the effect of GF on environmental issues and discovered that GF improves ecological sustainability (Debrah et al., 2022 ; Ji & Zhang, 2019 ; Wang et al., 2022 ). Furthermore, authors have pointed out the same for the CE. CE isn't just seen as a way to protect the environment. They also say that it is good for the economy because it saves money, creates jobs, and has innovative and disruptive business strategies that transform or challenge the way business is done (Antikainen et al., 2018 ; Jinru et al., 2021 ). Because of the multidimensional nature of CE business models in comparison with traditional business models, as well as the consequences for other sectors of the economy, companies are searching for opportunities inside the CE or collaborating with companies or financial institutions that have shifted or helped towards the CE in order to profit financially (Jinru et al., 2022 ; Mngumi et al., 2022 ). The GF is a strategic approach to incorporate the financial sector in the shift to resource-efficient and low-carbon sectors, as well as adaptation to climate change. It also helps in the implementation of the green innovation agenda (Mngumi et al., 2022 ; Umar et al., 2021 ). The previous study identified various advantages of GF, such as it promotes technical dissemination for environmentally friendly facilities, supports in the building of competitive advantage, contributes to corporations, and enhances economic prospects (Muganyi et al., 2021 ; Soundarrajan & Vivek, 2016 ; Umar et al., 2021 ). Table 2 provides a classification scheme that defines several forms of green financing, and their implementations green financing is clearly relevant to CE adaptation activity and it is updated in table by (Debrah et al., 2022 ). This paper shares the review that can be used to make suggestions for future research, legislation, and practice in the parts CE.

4.3 GF in CE: key components and interactions

A crucial element in the shift to a more sustainable and CE is green money. GF promotes the adoption of CE principles and supports sustainable development by allocating financial resources to environmentally and socially responsible projects (Liu et al., 2021 ). This framework (Fig.  7 ), which illustrates the movement of financial resources, information, and materials among different stakeholders, sectors, and strategies, provides an overview of the green GF within a CE.

Navigating green finance in the circular economy: Key components and interactions

The financial inputs, which include government money, green bonds, equity investments, loans, and other sources of capital, are at the heart of GF. These funds are crucial for accelerating the transition to a CE, innovation in technology, improving industrial structure, and supporting environmentally friendly initiatives. In order to direct investments toward projects that adhere to the principles of the CE, intermediaries like financial organizations, banks, and investment funds play a critical role in facilitating the allocation of these resources (Flaherty et al., 2017 ; He et al., 2019 ; Yaoteng & Xin, 2022 ). The CE’s “targeted sectors” include a broad range of businesses and projects that aim to minimize their negative environmental effects and maximize their efficient use of resources. Among these industries are clean transportation (Tolliver et al., 2019 ), eco-industrial parks (Sakr & Abo Sena, 2017 ), green buildings (Ikram, Ferasso, et al., 2021 ), waste management (Scharff, 2014 ), sustainable farmland (Hens et al., 2018 ), and renewable energy (Tolliver et al., 2019 ). Investments in these areas promote innovation, create employment, and advance sustainable development, all of which help to create a more circular and resource-efficient economy.

Recycling, remanufacturing, product-as-a-service, sharing economy, resource efficiency, and eco-design are just a few examples of the CE strategies that businesses and governments can use to minimize waste, increase product lifespans, and decrease the need for raw materials (De Oliveira Neto et al., 2016 ; Ghisellini & Ulgiati, 2020 ). These tactics boost long-term revenue and competitiveness in addition to minimizing the environmental impact of economic activity. Various stakeholders, including governmental organizations, banking institutions, non-governmental organizations, businesses, small and medium-sized enterprises, and private investors, make up the GF ecosystem (Falcone et al., 2018 ; Pan et al., 2022 ). Each of these parties has a particular responsibility for advancing and putting into practice CE principles, and systemic change cannot be achieved without their combined efforts. The development of the GF environment and the promotion of the adoption of CE principles are greatly influenced by policy and regulatory frameworks. Policies like carbon pricing, tax breaks, and green procurement can encourage the demand for sustainable goods and services while also creating favorable market circumstances for green investments (Majumdar & Sinha, 2019 ; Steckel et al., 2017 ). Governments can make sure that financial resources are allocated to initiatives that improve the environment and societal well-being by setting clear rules, criteria, and incentives.

Delivering favorable environmental and social results is the ultimate goal of GF in a CE. Green funding can support biodiversity preservation, lower greenhouse gas emissions, and increase resource efficiency (Maio & Rem, 2015a , 2015b ; Yin et al., 2012 ). Socially, GF can help with the development of new jobs, the reduction of destitution, and the enhancement of health and wellbeing. Stakeholders can evaluate the success of GF initiatives based on these results and then make educated decisions about future allocations by doing so. The comprehensive review performed found that GF is not effective without monitoring and reporting because they allow stakeholders to follow the development and results of their expenditures. The effectiveness of GF efforts in promoting CE practices can be determined by looking at key performance indicators like the amount of GF allocated, the number of projects supported, and the environmental and social outcomes obtained.

5 Discussion

5.1 green financing and the road to the circular economy.

This study demonstrates that the majority of authors (e.g., Khorasanizadeh & Parkkinen, 2015 ; Lopes de Sousa Jabbour et al., 2020 ; Severo et al., 2015 ; Yaoteng & Xin, 2022 ; Zhao et al., 2018 ) concentrate on the environmental developments in performance of the CE instead of taking a broad view on all aspects of CE and environmental sustainability; however, this is also right for a number of researchers in the end field. Whereas the environmental approach used by sustainable development can range from openly and implicitly comprehensive to the analysis of specific concerns, the majority of researchers conceptually limit the CE to resource input, waste output, and pollution output. Other concerns, such as financial needs, climate change, land usage and ecological degradation, are only alluded to by the latter researchers (e.g., Bongers & Casas, 2022 ; Geng et al., 2012 ; Kalmykova et al., 2018 ; Lv et al., 2021 ; Murray et al., 2017 ; Song et al., 2021 ). Despite this, the present worldwide environment presents a threat to the finance accessible to developing countries. The pandemic exacerbates the debt burdens of developing countries, which reduces the amount of public funds accessible for projects for sustainable development. The OECD anticipates that foreign private finance inflows might decline by $700 billion in 2020 relative to 2019 levels, which would be 60 percent more than the effect of the global economic crisis of 2008 (OECD, 2020 ). Such consequences would heighten the possibility of significant development setbacks, which would increase global susceptibility to developing environmental and public health hazards, such as future pandemics, climate change, and other global public harms, such as biodiversity loss or plastics pollution (Bradford, 2018 ; IRR et al., 2017 ; Moss et al., 2013 ). The regulatory agencies encourage banks to offer green lending services and sustainable avenues for company financing via the securities market. The optimization of energy-saving resources and green financial strategies. The capital outflow process, as opposed to the capital movements method, restricts the growth of businesses with high levels of energy and pollution utilization. During functioning, the four following procedures will generate vast amounts of data (Yaoteng & Xin, 2022 ). Financial markets technique, financial outflow process, project planning method, and risk aversion method are the four communication processes of green financing to green innovation. The capital inflow system refers to financial institutions that invest extra money in protecting the environment and energy-saving businesses to encourage companies to engage in green development activities per the requirements of applicable national legislation (Tara et al., 2015 ). The regulatory authorities encourage banks to offer green lending facilities and green pathways for company financing via the securities market. Government agencies enhance the financial process and promote sustainable funds to invest in firms dedicated to environmental preservation and energy conservation (Yaoteng & Xin, 2022 ). The capital outflow system is diametrically opposed to the capital influx process, which restricts the growth of businesses with high emissions and energy use levels. The project selection method enables GF to serve as a channel for firms and investors to continue contact. In this setting, businesses with superior protection of the environment abilities can acquire financing from banking firms, and financial institutions can also identify protection of the environment and energy-saving companies with competitive improvements. The risk-aversion process indicates that while security of the environment and energy-saving firms have wide growth opportunities, their financial risk is greater than that of conventional businesses (Zheng & Meng, 2018 ). The initial two processes were responsible for the capital-oriented impact, whereas the last two were responsible for the innovative decision-making impact (Zhao et al., 2018 ). GF as a whole plays a greater role in supporting green development under formal environmental legislation. Formal environmental legislation plays a greater role in supporting green revolution in the context of green financing.

The size of the company is an important determinant for the feasibility of a circular system; according to Aranda-Usón et al. ( 2019 ), the more challenging it will be to raise capital, the small the firm. Another issue is the expense of the circular manufacturing process, which will depend on the size of the businesses, possibly as a result of scale advantages. Therefore, using public policy and tax incentives to boost this kind of effort might be one method to promote the adoption of circular processes by small and microbusinesses. In this manner, relevant research questions might be found based on prior publications. First, how do public policies affect and how crucial are they to the economic feasibility of CE projects for micro- and small businesses? What role do public finance lines play in small and microbusinesses' adoption of circular manufacturing practices (Bartolacci et al., 2017 ; Sarmento et al., 2022 ). Furthermore, the study by Jinru et al. ( 2021 ) found that the management, government/regulators, and policymakers are enormous in order to boost efficiency and reach CE; their research first suggests that a firm should integrate varied green efforts with on-the-ground activities while sticking to the established sustainable production. The CE facilitates the cost-effectively transforming of linear economic systems into circular systems for long-term sustainability. CE enterprise practices can support in resolving resource deficiency challenges while enhancing the company's profitability. In addition, sustainable production will assist a business's key strengths in establishing sustainability across the company (Gbolarumi et al., 2021 ). It is now recommended that stakeholders integrate green systems and procedures while developing a sustainable plan of action and monitoring the outcomes produced through the integrity of their SP. Second, in order to boost the pace of CE adoption. Green financing enables buyers and producers to collaborate in mitigating climate change, provides transparency into the activities getting financed, and enables financiers to monitor the impact of their purchase. Why Finance Circularity with GF ? Increasingly, the banking industry recognizes the benefits of sustainability. It has been noted that customers that are environmental leaders are more inventive, have superior financial performance, and have higher credit ratings. The risk is a last factor in the relationship between the CE and financial elements. Some research emphasized the increased risk exposure simply due to the CE's new manufacturing mechanism. The environmental risk that the linear system represents must be taken into account (Falcone et al., 2018 ; Soundarrajan & Vivek, 2016 ). How can one balance the hazards of the CE with the environmental impacts that the existing arrangement poses as a result? Is it feasible to develop a financial ratio or financial report that more objectively reveals and assesses such facets? A significant number of papers indicate the absence of metrics to assess the effectiveness of the CE or provide policymakers with evidence in support of this deficiency (Cui et al., 2018 ; Ghisellini & Ulgiati, 2020 ). The life cycle of substances (Gigli et al., 2019 ), financial environmentally friendly innovation developments (Portillo-Tarragona et al., 2018 ), green and smart cities (Sarmento et al., 2022 ), CE-related blockchain technology (Rieckhof & Guenther, 2018 ), environment friendly accounting method and its applications (Yin et al., 2012 ), and other topics related to the CE were identified in other analyses that were not focused on corporate finance issues. The banks that control more assets and resources to sustainable enterprises and assist them in facilitating the shift to a low-carbon market develop a robust portfolio. Therefore, sustainability is currently a commercial potential for the financial sector (Jinru et al., 2021 ).

5.2 Implications to theory and practice

The results of this comprehensive review have important effects on both theory and practice. This research adds to the body of knowledge by creating a link between GF and the CE. This was completed by conducting a comprehensive literature review as well as a descriptive and theme assessment. The collaborative interaction and feedback among the numerous variables involved in this relationship were examined using the coupling coordination level framework. This research also emphasizes the significance of financial indicators and incentives, such as project funding, GF, company and consumer understanding, in encouraging the implementation of sustainable management practices and the shift from a linear to a CE. In practice, this study will help to raise knowledge of CE and the use of GF among professionals from many industries. Indeed, the findings of the literature study provide important suggestions and recommendations that governments, institutions, academics, and businesses may employ as management insights. Managers might conveniently increase their understanding about processes, practices, and technological explanations that could be beneficial in assisting their CE initiatives through them, depending on their need to concentrate on various aspects of CE and how finance can assist them in achieving CE. Furthermore, the unique characteristics of each sector, as determined by the CE methods and technologies used, enable certain sectors in their transition to a CE. This study provides a roadmap for policymakers, businesses, and financial institutions to promote sustainable practices and economic growth while also preserving the environment.

5.3 Key lessons learnt

First, provided that adopting a CE has a strong theoretical environmental clarification and that businesses of all sizes will eventually be required to adhere to environmental legislation, it is essential to have financial measures that can demonstrate the positive effect on market share value. Business sustainability does not conflict with the activities of investors; this will serve as the primary motivation for the implementation of eco-friendly management initiatives, which can act as the missing financial reason and, as a result, as a mechanism for the shift from the linear to the CE. It is vital to go over the present difficulties and hindrances related to finances, market importance, and practice optimization. It is necessary to research how GF can help to increase the CE and investment possibilities. The second lesson is that there is an increasing demand for innovative funding tools to support CE projects. Traditional financing methods may not always be appropriate for CE initiatives, our review suggests, and there is a need to investigate novel financing models that can help enhance the CE transition. Third, financial, institutional, and national benchmarks are required to examine the growth of different circular businesses, and financial incentives through GF, project subsidies, and national, corporate, and consumer awareness are important. Finally, in order to realize the maximum potential of the CE, expenses, market value, and process optimization must be surmounted.

6 Research limitations and future directions

Researchers in the future should think about using a multidimensional conceptual framework to further investigate the connection between GF and CE. Researchers, practitioners and policy makers can use these findings to better understand the link in this twofold domain. As a foundation for future study and the development of government orders, Fig.  8 depicts the fundamental dimensions, constituent components, and interrelationships in the twofold field of GF and CE. The main levels of the conceptual model are the GF dimensions, the CE dimensions, and the additional elements (pertaining the technological, economic and social dimensions). In contrast to the CE, which focuses on sectors, initiatives, stakeholders, and collaboration, Green Finance is more concerned with financial instruments, mechanisms, as well as policy and regulatory frameworks. The financial, technological innovation, improving industrial structure, environmental supervision, and superior economic development components make up the additional elements.

Multidimensional Conceptual Framework: Exploring the Interconnections between Green Finance and Circular Economy

Providing financial backing and investing in R&D for technological innovation are two examples of the crucial roles finance plays in assisting GF, both of which are present in the framework as “Additional Elements”. “Innovation in technology” results in “Technological Advancements,” which consequently aid “Improving Industrial Structure” and “CE Sectors and Initiatives” in their respective changes. Proper environmental supervision affects the policy and regulatory framework and guarantees adequate monitoring and compliance. By maintaining economic development, “Superior Economic Development” helps improve the stability of the financial system.

Future research should look at the role that circularity and corporate sustainability may play in boosting GF and financial possibilities. Future research can also use empirical analysis to look at the connection between GF and CE innovation. Risks come with development in green financing and investing, and the more the risk, the greater the reward. The balance between risk and anticipated return in GF and investment is currently a topic with little research. Future research should examine the exchange between predicted green returns and green risk in considerable detail. Furthermore, the potential for green financing in emerging nations can be examined. It is also important to investigate how the difficult institutional and policy conditions impact the development of GF and investment industries in developing nations. Such research must consider the distinctive institutional and governmental constraints present in developing countries.

The fields of GF and the CE can build upon the complex conceptual structure. It provides an aerial perspective of the interconnected parts and how they work together, making it easier for researchers, policymakers, and practitioners to see the possibility for cooperation. Future research efforts can aid in the advancement of scholarship and the development of policies and strategies to promote sustainable development through GF and CE initiatives by examining the pathways outlined in this framework.

Focusing upon the multidimensional conceptual framework and lessons learned, it is possible to develop a research roadmap that effectively addresses the current gaps within the domains of GF and CE. The present study proposes the identification of research directions that can address the aforementioned gaps. This study aims to evaluate the efficacy of diverse financial instruments and mechanisms in advancing CE activities. The research can include various methodologies such as case studies, comparative analysis, or experimental designs to assess the efficacy of diverse financing tools and strategies on projects related to CE. Moreover, the research could potentially center on the identification of optimal methodologies, the examination of the effects of particular regulations on the advancement of GF and CE, and the investigation of the feasibility of standardizing policies across various nations or territories.

This study aims to analyze the contribution of different sectors towards the promotion of CE practices. It involves the identification of effective business models, innovations, and technologies that can be expanded and duplicated. The proposed research may encompass a variety of methodologies, including case studies, surveys, and comparative analysis, to investigate the role of various sectors in advancing the principles of the CE. Furthermore, the proposed study needs to evaluate the accessibility of monetary funds, investigate novel financing approaches, and recognize impediments to obtaining financial support for GF and CE endeavors. Through the exploration of these research directions, forthcoming studies have the potential to address the knowledge deficits within the domains of GF and CE, thereby furnishing significant perspectives for policymakers, practitioners, and researchers.

7 Conclusion

This study aimed to establish a connection between GF and the CE through a systematic assessment. To achieve this objective, a systematic literature review was conducted followed by a descriptive and thematic assessment. The aim was to enhance understanding regarding the incorporation and implementation of CE concepts, as well as its relationship with GF and vice versa, and facilitate their joint adoption. In order to understand the collaborative interaction and feedback among many factors, it was essential to use the coupling coordination level framework since GF and the CE are linked in a systematic and complicated way. It is a fact that business organizations consistently work to improve their financial performance and adapt to the new circumstances surrounding the availability of natural resources, as well as the new circumstances surrounding consumer and investment requirements that are influenced by ESG factors or Circular Business Model parameters. Researchers have found that the concepts of sustainability and innovation can be used to measure eco-innovation but require GF. Businesses that use green technologies must strike a balance between the need to improve the sustainability of their goods and satisfying customer demands. Although each of these criteria are important, they might not be equally valuable in terms of the observable benefits provided. Although all three elements share the goal of attaining corporate success, organizations may differ in how they prioritize financial, ecological, and social achievement when engaging in CE.

To summarize, the constraints to financial performance faced by companies adopting the CE are defined by (a) the size of the company and the primary capital cost, (b) challenges for small and medium businesses, (c) additional complicated business structuring, and (d) larger level of risk, as CE is new concept, still not grown fast, and indicative as a linear business system. Furthermore, the lack of financial, institutional, and national benchmarks to evaluate the growth of circular companies poses a significant impediment to the implementation of the CE. It is essential to note that previous to economic success, an analysis of the product's expenses in all stages of manufacturing must take into account materials from various sources (3Rs). As a result, financial management of production expenses is required, because materials for various goods can have varying life cycles. As a result, variables such as financial incentives through GF, project subsidies, and national, corporate, and customer consciousness are critical to the development of the CE.

It is becoming more and more important for businesses and organizations to embrace environmentally sustainable practices provided the highly favorable environmental rationale for implementing a CE. To correctly represent the favorable effect on market value shares, financial indicators are required. GF may function as the primary catalyst for the implementation of sustainable management practices as long as it is consistent with financial institutions' interests. This financial motivation could be the impetus required to convert from a straight to a CE. Costs, market worth, and process optimization are a few challenges that must still be overcome.

Data availability

The original contributions presented in the study are included in the article/Supplementary Material; further inquiries can be directed to the corresponding author.

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Can green credit policies improve the digital transformation of heavily polluting enterprises: A quasi-natural experiment based on difference-in-differences

Roles Conceptualization, Writing – review & editing

Affiliation School of Economics and Management, North University of China, Taiyuan, Shanxi, China

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Affiliation School of Economics and Management, North University of China, Guiyang, Guizhou, China

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Affiliation School of Economics and Management, North University of China, Xingtai, Hebei Province, China

• Xuan Zhou, 
• Dejia Yuan, 
• Zhengwei Geng

• Published: August 29, 2024
• https://doi.org/10.1371/journal.pone.0307722
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The digital transformation of the manufacturing industry is closely linked to green credit policies, which jointly promote the development of the manufacturing industry towards a more environmentally friendly, efficient and sustainable development. Based on the research sample of China’s manufacturing A-share listed companies from 2008 to 2022, this paper uses the difference-in- differences (DID) method to analyze the impact of green credit policies on the digital transformation of heavily polluting enterprises. The results show that green credit policies significantly inhibit the digital transformation of heavily polluting enterprises. In terms of the adjustment mechanism, the R&D investment of enterprises and the financial background of senior executives have weakened the inhibitory effect of green credit policies on the digital transformation of heavily polluting enterprises. When the R&D investment is low, the inhibitory effect of the policy is more significant, but with the increase of R&D investment, the inhibitory effect of the policy gradually weakens, indicating that there is a substitution relationship between the two. Enterprises with senior financial expertise have a deeper understanding of financial feasibility and benefit analysis, and are more receptive to the high-risk investment of digital transformation, while their financial network resources can help broaden financing channels, reduce financing constraints, and further reduce the financial difficulty of digital transformation. In addition, the green credit policy has a stronger inhibitory effect on the digital transformation of non-state-owned enterprises and enterprises that do not hold bank shares. The conclusions of this paper are expected to provide some policy implications for the subsequent green credit policies in promoting the digital transformation of the manufacturing industry.

Citation: Zhou X, Yuan D, Geng Z (2024) Can green credit policies improve the digital transformation of heavily polluting enterprises: A quasi-natural experiment based on difference-in-differences. PLoS ONE 19(8): e0307722. https://doi.org/10.1371/journal.pone.0307722

Editor: Juan E. Trinidad-Segovia, University of Almeria: Universidad de Almeria, SPAIN

Received: March 29, 2024; Accepted: July 10, 2024; Published: August 29, 2024

Copyright: © 2024 Zhou et al. 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.

Data Availability: All relevant data are within the manuscript and its Supporting Information files.

Funding: The author(s) received no specific funding for this work.

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

Introduction

Today, as the world experiences rapid digital technology and rising environmental issues, the challenges facing businesses are more complex and urgent. The frontier of digital technology has not only changed the business landscape, but also redefined the position of enterprises in global competition. At the same time, global environmental problems, such as climate change and resource depletion, are threatening the sustainable development of enterprises. As a result, digital transformation and environmental protection, as the two major themes that will lead the future development, are gradually becoming the core elements shaping the corporate strategy. On the one hand, driven by the current wave of digitization, the manufacturing industry is undergoing a profound change, and digital transformation has become a strategic choice for enterprises in meeting future challenges and seizing opportunities, as a strategic initiative integrating advanced technology and innovative thinking, which is leading the manufacturing industry into a new era. The digitalization of the manufacturing industry is a product of internal and external environmental factors [ 1 ], which has a significant impact on the production process and management process of enterprises, which not only changes the traditional production methods, but also leads to a major transformation of enterprise management, marketing, product innovation and other levels. On the other hand, environmental protection is of great importance in today’s global economy. Manufacturing companies must comply with increasingly stringent environmental regulations and standards, which is not only a social responsibility for enterprises, but also an important way to achieve sustainable development. Environmental requirements are driving companies to innovate in technology and business models, and to explore new development opportunities. Through R&D and application of environmental protection technologies, enterprises can develop new products and services, and open up new markets, which can not only enable the manufacturing industry to meet the regulatory requirements of the green environment and social expectations, but also improve resource utilization efficiency, reduce operational risks, enhance market competitiveness, and explore innovation and development opportunities. Driven by digitalization and environmental protection, manufacturing enterprises should integrate environmental protection into their strategic planning, promote green transformation, and achieve a win-win situation of economic and environmental benefits.

As a financial instrument to encourage environmental initiatives, green credit policies provide a new source of funding for companies, and by rewarding environmental measures, they may play a key role in driving companies to participate more actively in the process of digital transformation. From the perspective of capital, the digital transformation of the manufacturing industry requires huge financial support, and this policy may provide enterprises with a way of sustainable financing, which is expected to alleviate the huge financial pressure they may face in the digital transformation. From the perspective of incentive mechanism, green credit policies may also become a driving force for enterprises to take the initiative to move towards digital transformation. With the emphasis of the government and society on environmental responsibility, enterprises are expected to obtain more favorable green credit terms by adopting digital technologies to improve the efficiency of production processes, reduce resource waste, and reduce environmental emissions.

However, while green credit policies may encourage firms to invest more in environmentally friendly technologies in the short term, their specific impact on long-term technological innovation by firms, especially digital transformation, which requires a significant investment of capital and time to bear fruit, remains an area of challenge and unanswered questions. Firstly, the complexity of digital transformation is reflected in the fact that it is not just a technological update, but a comprehensive organizational change. It involves adjustments to company culture, employee training, and the integration of new technologies on a number of levels, all of which take time and effort to change. While short-term green credit policies incentives may push companies to make initial investments in environmentally friendly technologies, to achieve digital transformation in the true sense of the word, companies need longer-term plans and commitments. Second, investments in digital transformation are not permanent and require a continuous injection of capital at different stages. The incentives provided by green credit policies in the short term may not be able to meet the funding needs for the entire transformation cycle. Enterprises may receive some financial support in the initial stage, but the scale and frequency of financial investment may gradually increase as the project deepens and expands. In summary, enterprises must explore the relationship between green finance and digital transformation more actively while pursuing sustainable development. Especially for those heavily polluting enterprises, digital transformation is not only a need to enhance their competitiveness, but also an urgent requirement to fulfill their social responsibility. In this context, whether green credit policy can become a catalyst to promote the accelerated digital transformation of heavily polluting enterprises is a question that deserves in-depth exploration.

Currently, academics have conducted a lot of research on manufacturing digital transformation and green credit policies respectively. On the one hand, studies have shown that digital transformation helps alleviate the information asymmetry between investors and enterprises, and between enterprises and product supply and demand markets, enabling investors to more accurately assess the value and potential of enterprises [ 2 ]. At the same time, the information asymmetry between enterprises and product supply and demand markets has also been alleviated to a certain extent, which leads to more efficient operation of the market. Enterprise digital transformation through digital technology, enterprises can more easily access to financing channels and financing information, improve the flexibility and efficiency of financing, can ease the enterprise financing constraints and reduce the cost of financing, which provides a wider range of financial support for the development and expansion of enterprises, and helps to promote the innovation and upgrading of the manufacturing industry [ 3 ]. In addition, digital transformation can significantly improve the innovation efficiency of enterprises, especially green innovation [ 4 ]. Digital knowledge management (KM) has a significant positive impact on technological innovation, mainly through absorptive capacity, adaptive capacity and innovative capacity [ 5 ]. Meanwhile, the digital transformation of high-tech industries has a positive effect on both technological innovation and achievement transformation [ 6 ]. On the other hand, in terms of green credit policies, the introduction of the Green Credit Guidelines in 2012 marked the official implementation of green credit policies, which is the core of China’s green credit policies system and an important perspective for many scholars to study [ 7 ]. However, most current studies show that the implementation effect of green credit policies is not satisfactory [ 8 ]. On the one hand, green credit policies will inhibit bank loans and long-term financing of heavy polluting enterprises through financing constraint theory and financing cost theory [ 9 ], and significantly reduce long-term bank loans of heavy polluting enterprises [ 10 ]. On the other hand, the green credit policy significantly inhibits the level of technological innovation of heavy polluters [ 11 ]. Maybe the policy will improve the sustainable development of enterprises in the short term, but it has no long-term effect [ 12 ] and promotes poorly managed zombie enterprises [ 13 ].

In summary, digital transformation and green credit policies are key factors in the process of high-quality development of the manufacturing industry in terms of technological innovation, transformation and upgrading. At present, there is a large number of literatures on the digital transformation of the manufacturing industry and green credit policies, but few studies combine the two to explore the relationship between green credit policies and the digital transformation of the manufacturing industry. Therefore, the marginal contributions of this paper may be: Firstly, the uniqueness of the research: This paper may be the first time to deeply explore the relationship between digital transformation in the manufacturing industry and green credit policies, combining these two key areas for research. This research is unique in that it connects the two key themes of digital transformation and environmental policies, filling a gap in the existing literature and providing a new research perspective for the academic community. Secondly, the importance of research to academia and practice: This paper fills the gap in the academic understanding of the relationship between digital transformation and green development in the manufacturing industry, and provides new ideas and methods for solving problems in this field. At the same time, the research results of this paper are of great significance for practice, which can provide useful reference suggestions for China’s green credit policies formulation and digital transformation of the manufacturing industry, promote the sustainable development of the manufacturing industry, and promote the development of China’s economy in a greener and more innovative direction. Thirdly, the theoretical and empirical contributions of the research: By exploring the impact mechanism of green credit policies on the digital transformation of the manufacturing industry, this paper expands the existing theoretical framework and provides new ideas and perspectives for theoretical research. Besides, this paper provides new empirical evidence based on empirical data, deepens the understanding of the mechanism of green credit policies in the process of digital transformation, and provides strong support for practice in related fields. Fourthly, the potential impact of the research: The research results of this paper are expected to have a profound impact on policy-making and practice. By proposing more effective green credit policies to promote the sustainable development of the manufacturing industry, this paper will help guide the government and enterprises to better formulate policies and strategies, promote the development of China’s manufacturing industry in a more digital, green and sustainable direction, and contribute to the realization of high-quality economic development.

Materials and methods

Theoretical analysis and research hypothesis.

Digital transformation typically requires large-scale capital investments to meet the costs of building information technology infrastructure, procuring innovative technologies and training employees. Such investment is necessary to drive enterprises to achieve business process optimization, improve productivity, expand market share, and enhance innovation. However, the introduction of “the Green Credit Guidelines” tends to exacerbate the financing constraints of heavy polluters [ 14 ], which in turn may hinder their active participation in digital transformation. Firstly, from a financial perspective, the financial requirements for digital transformation are usually large, including but not limited to the updating of IT infrastructure, the construction of big data analytics platforms, the introduction of artificial intelligence technologies and related training costs. Heavily polluting enterprises usually face higher environmental risks, and from the "principal-agent cost theory" and "modern contract theory", it can be seen that the principal-agent cost between the bank, as a creditor, and the enterprise will increase with the increase in project risks, including the costs of identification, monitoring, management and auditing. The cost of identification, monitoring, management and auditing, etc. will lead banks to adopt a more conservative strategy when considering costs and benefits. Meanwhile, according to the "risk compensation theory", in order to compensate for the potential environmental risks and possible default risks in the future, banks and financial institutions may require heavy polluting enterprises to pay higher financing costs or put forward more stringent lending conditions [ 15 ], such as higher interest rates or additional collateral, in order to obtain the price of risk-bearing compensation. This will lead to higher financing costs for heavy polluters [ 16 ]. This means a tighter financial situation for heavy polluting enterprises who are already under pressure to make environmental improvements, reducing their ability to invest in digital transformation.

Secondly, from the perspective of environmental protection and governance costs, the environmental regulatory effect brought about by “the Green Credit Guidelines” will increase the rectification efforts of heavy polluting enterprises to reduce pollution and emissions, which will to some extent reduce the priority and capital investment in digital transformation projects, thus slowing down the process of digital transformation. On the one hand, heavy polluting enterprises may need to reallocate resources in order to comply with the requirements of “the Green Credit Guidelines”, which means that enterprises may need to invest more R&D funds and human resources into the end-of-pollution treatment [ 17 ], reducing the allocation of funds and resources in digital transformation. This not only makes digital transformation projects significantly less economically attractive within enterprises, but also further inhibits the pace of transformation in the digital field for heavily polluting enterprises. On the other hand, the process of environmental protection management may involve changes such as re-planning of production lines, optimization of production processes, and upgrading of environmental protection facilities. This not only requires the investment of a large amount of resources, but also may lead to disruptions and uncertainties in the production process, bringing additional disturbances to the normal operation of the enterprise. Accordingly, the author proposes the following hypothesis:

H1: “The Green Credit Guidelines” significantly inhibit the digital transformation of heavy polluters.

The amount and quality of an enterprise’s R&D investment is directly related to its innovative capacity and future development potential. In today’s competitive market, firms that are able to increase their R&D investment on a sustained basis are usually more likely to be able to adapt to market changes and meet future challenges. High levels of R&D investment may play a key role in the digital transformation of heavily polluting firms in weakening the disincentive effect of green credit policies. Firstly, increased R&D investment can make firms more technologically innovative [ 18 ], accelerate their digital transformation process, and promote the adoption of more advanced digital technologies. This not only improves productivity and product quality, but also helps to reduce environmental emissions, thus meeting the expectations of green credit policies on environmental requirements. Technological innovation makes enterprises more flexible in digital transformation and allows them to better respond to the environmental standards of the policy, thus weakening the inhibiting effect of the policy on digital transformation. Secondly, a high level of R&D investment helps to improve the productivity of enterprises, and through the application of digital technology, enterprises are able to manage and utilize resources more effectively. Initiatives such as optimizing the supply chain and implementing smart manufacturing can reduce the waste of energy and raw materials and lessen the burden on the environment. This efficient use of resources makes it easier for firms to adapt to the environmental requirements of the policy, diminishing the constraints of green credit policies on digital transformation. Once again, increased investment in R&D demonstrates a firm’s commitment to innovation and sustainability. This strategic shift makes firms more inclined to adopt digital technologies to improve productivity and reduce environmental impacts. For heavily polluting firms, digital transformation is not only a technological upgrade, but also a necessary tool to comply with the SDGs. Investments in research and development lead companies towards a digitalization path that is consistent with green credit policies, slowing down the disincentive effect of the policies.

At the same time, investment in R&D is not only about technical aspects, but also includes investment in training and culture. By improving employees’ understanding and ability to apply digital technologies, companies can better adapt to the level of technology required for digital transformation and more easily comply with green credit policies. Building green awareness and a culture of sustainability can help firms better integrate digital technologies and mitigate the disincentive effect of policies on digital transformation. In addition, the relationship between R&D investment intensity and enterprise survivability shows a "U" non-linear relationship, i.e., R&D investment intensity can greatly improve the survivability of enterprises after reaching a certain level [ 19 ]. This implies that a moderate increase in R&D investment by enterprises in the process of digital transformation can improve their competitive position in the market while increasing their innovation ability, and mitigate the potential inhibitory effect of green credit policy on their digital transformation. Overall, corporate R&D investment may affect corporate digital transformation on multiple levels by driving technological innovation, improving productivity, promoting sustainable development, and fostering corporate culture. Efforts in all these areas can help weaken the inhibitory effect of green credit policies on the digital transformation of heavy polluting enterprises and enable them to carry out their digital transformation more smoothly. Accordingly, the author proposes the following research hypothesis:

H2: Firms’ R&D investment weakens the dampening effect of “the Green Credit Guidelines” on the digital transformation of heavily polluting firms.

The digital transformation of an enterprise is inherently a high-risk business investment, as it involves huge capital investment in new technologies, systems, training and human resources, and such high-cost, resource-intensive investment poses a greater financial challenge to the enterprise. Importantly, digital transformation is usually characterized by greater uncertainty, with technology risk being a key consideration. The introduction of new technologies may lead to technology integration issues and additional costs, and the results and rewards of digital transformation usually take longer to become apparent. In addition, digital transformation requires a cultural shift within the organization, including employee training and adaptation to new ways of working, and this cultural change can be a complex and time-consuming process. Top echelon theory suggests that executives with a financial background typically have a greater tolerance for risk. This trait may have a significant impact in the project decision-making process, making executives more willing to take risks and thus increasing the likelihood that firms will choose riskier projects [ 20 ]. Because executives with a financial background typically have a deeper understanding of national policies, market volatility, and financial instruments, they may be more responsive to financial incentives in green credit policies. Compared to their counterparts with non-financial backgrounds, they may be able to utilize green credit resources more effectively in digital transformation and reduce the cost of corporate finance, which in turn will make them more confident in dealing with potential risks, and thus more willing to choose higher-risk investments in corporate projects, leading to a smooth digital technology transition.

At the same time, as executives with a financial background usually have profound financial knowledge and risk management skills, they have a deeper understanding of financial feasibility and benefit analysis. Therefore, they pay more attention to the financial feasibility of enterprise digital transformation in the decision-making process, which helps to establish a more efficient financial review and decision-making process [ 21 ], and can more accurately assess the positive impact of green credit policies on the enterprise’s financial position compared to others. This financial sensitivity makes them more capable of reducing potential uncertainties through rational financial strategies, and more able to increase enterprises’ acceptance of digital transformation, thus more actively promoting enterprises to follow the path of green transformation. Additionally, executives with financial background can use their own financial network resources to establish bank-enterprise contacts, broaden financing channels, reduce the information asymmetry between the enterprise and the bank, so that the enterprise can obtain more funds to alleviate the degree of enterprise financing constraints [ 22 ], and further reduce the financial difficulty of digital transformation. Based on the above analysis, the author puts forward the following research hypotheses:

H3: Executive financial background weakens the dampening effect of “The Green Credit Guidelines” on digital transformation of heavily polluting firms.

Research design

Model building..

“The Green Credit Guidelines” issued in 2012 provide a good quasi-natural experiment to study the impact of green credit policies on the digital transformation of manufacturing industries. According to the characteristics of this policy, heavily polluting firms should be affected firstly because they face higher environmental risks. Therefore, this paper includes heavily polluting enterprises in the experimental group and non-heavily polluting enterprises in the control group.

Data sources.

This paper takes listed companies in China’s manufacturing industry from 2008 to 2022 as the initial sample, and in order to improve the data quality and ensure the validity of the empirical analysis, the initial sample [ 23 ] is screened in accordance with the following criteria: (1) exclude companies with financial anomalies during the sample period, such as ST,* ST, and PT; (2) exclude companies that change their industries between heavy polluting enterprises and non- heavy polluting enterprises during the sample period; (3) exclude key data companies with serious missing data; (4) to avoid extreme values interfering with the findings of this paper, all continuous variables are subjected to the upper and lower 1% shrinkage. Through the above screening, the final sample includes 660 companies with a total of 9,345 observations, of which heavy polluting enterprises contain 220 companies and non- heavy polluting enterprises contain 440 companies; the data used in the study come from the CSMAR database, the iFind database, the Wind database, the National Bureau of Statistics, and MarkData.com , among others.

Variable selection.

Explained variable . The explained variable in this paper is the level of digital transformation of the enterprise, referring to the research results of Chen et al. (2021) [ 24 ]: Based on the statistics of 99 digital-related word frequencies in four dimensions: digital technology application, Internet business model, intelligent manufacturing, and modern information system, the digital transformation index of manufacturing enterprises was constructed by using text analysis method and expert scoring method. First, use text analytics to construct Digit_text variables. The first step is to collect the annual reports of listed companies in the manufacturing industry from 2008 to 2022 and convert them into text format, and then extract the text of the business analysis part through Python. The second step is to extract a certain number of samples of enterprises that have been successful in digital transformation through manual judgment. In the third step, the selected samples were processed by word segmentation and word frequency statistics to screen out high-frequency words related to digital transformation, which can be divided into four dimensions: digital technology application, Internet business model, intelligent manufacturing and modern information system, which suggests that we can construct the digital transformation index of enterprises from four dimensions (see Table 1 ). In the fourth step, based on the words formed in the third step, the text before and after is extracted from the total sample of listed companies, and the text combinations with high frequency are found. The fifth step is to supplement the keywords on the basis of the existing literature to form the final word segmentation dictionary. In the sixth step, based on the self-built word segmentation dictionary, the Jieba function is used to segment all samples, and the number of keyword disclosures is counted from four aspects: digital technology application, Internet business model, intelligent manufacturing and modern information system, so as to reflect the degree of transformation of the enterprise in all aspects. On this basis, the word frequency data was standardized, and the entropy method was used to determine the weight of each index, and finally the Digit text index was obtained.

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https://doi.org/10.1371/journal.pone.0307722.t001

Secondly, according to the description of the above keywords in the annual report, the number of disclosures, and the production and operation of the enterprise, the expert scoring method is used to judge the degree of digital transformation of each company. Specifically, if "digitalization" is the main investment direction of the enterprise in the year, or "digitalization" has been integrated into the main business of the enterprise (including production, operation, R&D, sales and management, etc.), the Digit_score variable is scored with 3 points; If the enterprise’s relevant investment involves "digitalization", but "digitalization" is not the main investment direction at this stage, or the company’s main business has not yet achieved deep integration with "digitalization", 2 points will be scored for the Digit_score variable; If the company only touches on a small aspect of "digitalization", or only mentions it in its development strategy and business plan, the Digit_score is set at 1; If there is no mention of "digitalization" in the company’s annual report, or if the annual report reflects that the company has not implemented digital transformation, the Digit_score score is 0.

Finally, on the basis of the obtained Digit_text and Digit_score, the final total index Digit is synthesized according to the weight of 50% each, so as to fully reflect the degree of digital transformation of manufacturing enterprises.

Explanatory variable . Based on the principle of DID model, the explanatory variable is the interaction “Post*Treat” (DID) of the policy dummy variable (Post) and the industry dummy variable (Treat). Since “The Green Credit Guidelines” came into effect on 24 February 2012, 2012 is used as a time dummy variable in this article, and for 2012 and subsequent years, Post is equal to 1, otherwise it is equal to 0. Referring to previous studies [ 25 ], this paper selects the Catalogue of Classified Management Industries for Environmental Protection Verification of Listed Companies issued by the Ministry of Environmental Protection in 2008 to identify heavy polluting enterprises, and if they belong to the heavy polluting industries mentioned in the 2008 Ministry of Environmental Protection Notice, they are defined as heavy polluting enterprises. Treat is a grouping dummy variable, with 1 for heavily polluting enterprises and 0 for non-heavily polluting enterprises.

Control variables . In order to avoid the estimation bias caused by omitted variables, this paper refers to the results of previous research [ 26 ], and selects the following variables as the control variables in the empirical process: (1) Size, (2) Lev, (3) ROE, (4) Tobin Q, (5) Liquid, (6) Cashflow, (7) Loss, (8) Dual.

In summary, the specific definitions of the variables are shown in Table 2 .

https://doi.org/10.1371/journal.pone.0307722.t002

Descriptive statistics and analysis.

After the data in this paper were analyzed by descriptive statistics, the results are shown in Table 3 . It can be seen that the level of digital transformation (Digit) of China’s heavy polluting enterprises has a maximum value of 757, a minimum value of 0, and a standard deviation of 42.2630, indicating that there is a large difference in the degree of digital transformation among enterprises. The current ratio (Liquid) has a maximum value of 204.7421, a minimum value of 0.1065, and a standard deviation of 4.4500, indicating that there are also large differences in current ratios among firms. A higher liquidity ratio may indicate a more flexible operation and liquidity, while a lower liquidity ratio may indicate that a company is facing a shortage of funds or assets that cannot be liquidated quickly. Taken together, the descriptive statistics of both the level of digital transformation and the current ratio reveal that there are large differences in the operational management of China’s heavy polluters, and that these differences may have an important impact on the competitiveness and long-term development of the enterprises.

https://doi.org/10.1371/journal.pone.0307722.t003

Results and discussion

Benchmark regression.

Table 4 shows the empirical results of the impact of green credit policies on the digital transformation of heavy polluting enterprises, columns (1) and (2) are the cases of regression alone and adding control variables and fixing the year and individual, respectively. It can be concluded that the DID coefficients are all significantly negative, and the implementation of green credit policies significantly inhibits the digital transformation of heavily polluting enterprises, and hypothesis 1 is verified. The possible explanation is that at present, bank credit is the main financing method for most enterprises in China, and the introduction of the “The Green Credit Guidelines” will make banks more inclined to provide financial support to environmental protection enterprises, while heavy polluting enterprises are difficult to obtain financial support from banks due to serious environmental risks, which will eventually lead to a lack of funds for heavy polluting enterprises, thereby inhibiting a series of technological research and development activities such as digital transformation.

https://doi.org/10.1371/journal.pone.0307722.t004

Robustness check

Parallel trend test..

To ensure that the results of this paper are not affected by other policies and events, referring to the study of Zhang and Hu (2022) [ 27 ], the event study method is used to introduce multiple time dummy variables to construct early and lagged policy variables, and regressions are added while keeping the control variables unchanged. The results of the four coefficients before the promulgation of the policy and the coefficients in the last nine periods are shown in Table 5 , and the parallel trend test chart is shown in Fig 1 , the DID coefficients in the first four periods of the policy are not significant, while the coefficients in the nine periods after the promulgation of the policy are significantly negative. Therefore, the experimental group and the control group are comparable before the implementation of the policy in 2012, and the difference-in-difference regression model in this paper conforms to the parallel trend hypothesis, indicating that the original regression results are robust.

https://doi.org/10.1371/journal.pone.0307722.g001

https://doi.org/10.1371/journal.pone.0307722.t005

Placebo testing.

In order to ensure that the impact of “the Green Credit Guidelines” on the digital transformation of heavy polluting enterprises can truly reflect the effect of the policy without being influenced by other factors, drawing on the research results of Guo and Yin (2023) [ 17 ], an experimental group is randomly generated to simulate a situation that is not affected by the green credit policy, in order to compare the differences between the experimental group and the control group before the implementation of the policy. This is done by randomly, year-by-year and no-putback sampling 2008–2022 enterprises as the experimental group and the rest of the enterprises as the control group, and substituting them into model (1) for regression respectively. The probability density distribution of the coefficient estimates in the placebo test was obtained after 500 random draws and regression tests (see Fig 2 ). As can be seen from Fig 2 , the coefficient estimates from the placebo test are mainly distributed around zero, indicating that the original regression results are robust.

https://doi.org/10.1371/journal.pone.0307722.g002

In order to eliminate the endogeneity problem caused by potential selection bias, ensure the robustness of the research results, and improve the comparability of the experimental and control groups in terms of digital transformation, the propensity score matching method was used to conduct the robustness test, drawing on the study of Li (2023) [ 28 ]. All control variables in model (1) are selected as matching indicators in the propensity score matching model, and a Logit model is selected to estimate the propensity score, and then nearest-neighbor matching is used to re-match the experimental and control groups to ensure that there is no difference in other factors between the matched experimental and control groups except for the policy differences, and then subsequently re-estimate the model (1). Fig 3 shows that there is a significant difference between the experimental and control groups before matching, and Fig 4 shows the same trend after matching; the DID coefficient is still significantly negative at the 1% level from column (1) of Table 6 , which further validates the robustness of the findings of this paper.

https://doi.org/10.1371/journal.pone.0307722.g003

https://doi.org/10.1371/journal.pone.0307722.g004

https://doi.org/10.1371/journal.pone.0307722.t006

Replacement of core explanatory variables.

This paper replaces the explanatory variables with reference to the research results of Wu et al. (2021) [ 29 ], which are statistically derived from a total of 76 digitization-related word frequencies in five dimensions, namely, artificial intelligence technology, big data technology, cloud computing technology, blockchain technology, and the use of digital technology. The regression results are shown in column (2) of Table 6 , and the coefficient of DID is still significantly negative, which again verifies the robustness of the findings of this paper.

Treatment of endogenous problems.

Lagging the core explanatory variables by one period helps to alleviate the endogeneity problem and improves the model’s ability to explain time correlation and long-term causality. In this paper, by regressing the core explanatory variable DID with one period lag, the results are shown in column (3) of Table 6 , and the DID coefficient of is still significantly negative, which indicates that the findings of this paper are still robust after taking into account the time lag effect.

Mechanism of action tests

Moderating effects of r&d investment..

The results of the moderating effect test for R&D inputs reported in column (1) of Table 7 show a significantly negative coefficient for R&D inputs and a significantly positive coefficient for the interaction term between R&D inputs and green credit policies. This reflects that overall, enterprise R&D investment weakens the inhibitory effect of the Guidelines on the digital transformation of heavily polluting enterprises, and the inhibitory effect exerted by the policy is more obvious when R&D investment is low, but the inhibitory effect brought about by the policy gradually decreases with the increase of enterprise R&D investment, which suggests that there is a significant substitution relationship between R&D investment and the “the Green Credit Guidelines” in influencing the digital transformation of heavily polluting enterprises, and Hypothesis 2 can be verified. Firstly, the reason why R&D investment can attenuate the inhibitory effect of the green credit policy on the digital transformation of heavy polluting enterprises may be that by strengthening R&D investment, enterprises are more likely to improve their technological level, adopt more environmentally friendly technologies and production methods, and receive more support under the green credit policy, thus alleviating the policy’s restriction on the funds required for digital transformation. At the same time, it may indicate that policymakers recognize and encourage firms that meet their environmental goals through independent R&D, as these firms are more likely to succeed in digital transformation; second, the disincentive effect of the policy is relatively more pronounced when R&D inputs are low, which may be due to the fact that the policy puts more emphasis on promoting the digital transformation of firms through financial support, whereas, in the case of low R&D inputs, firms may be more rely on the green credit support provided by the government; finally, the inhibitory effect brought by the policy gradually decreases as the R&D investment of enterprises increases, which suggests that there is an obvious substitution relationship between the R&D investment and the green credit policy in influencing the digital transformation of heavily polluting enterprises, and the possible explanation is that enterprises may prefer to choose to meet the environmental protection requirements through independent R&D, instead of overly relying on the government’s green credit policies.

https://doi.org/10.1371/journal.pone.0307722.t007

Moderating effects of executive financial background.

The test results of the moderating effect of executive financial background reported in column (2) of Table 7 show that the coefficient of executive financial background is negative but insignificant and the coefficient of its interaction term with green credit policies is significantly positive, which suggests that executive financial background weakens the inhibitory effect of “the Green Credit Guidelines” on the digital transformation of heavily polluting firms, and Hypothesis 3 is verified. The possible reasons for this are as follows, the advantage of executive financial background lies in its greater tolerance to the high-risk nature of digital transformation. This is mainly reflected in the fact that financial expertise makes them more sensitive to the financial incentives of green credit policies and more effective in utilizing green credit resources, thus reducing the cost of corporate financing and increasing the acceptance of digital transformation as a high-risk investment. At the same time, gold executives with financial backgrounds have a deeper understanding of financial feasibility and benefit analysis, which reduces uncertainty through rational financial strategies and pushes enterprises to follow the green transformation path more actively. In addition, their financial contacts help broaden financing channels and reduce financing constraints, further easing the financial difficulty of digital transformation.

Heterogeneity analysis

Whether the enterprise is a state-owned enterprise..

In this paper, state-owned enterprises (SOEs) and non-state-owned enterprises (NSOEs) are regressed separately, and the results, as shown in columns (1) and (2) of Table 8 , indicate that the inhibitory effect of green credit policy on digital transformation is significantly higher for NSOEs than for SOEs. The possible explanations are as follows: firstly, SOEs and non-SOEs play different roles in China’s economic environment, with SOEs usually having easier access to government support and financing, while non-SOEs may be more dependent on indirect financing such as bank loans. Green credit policies may lead banks to be more prudent in approving loans and may place greater constraints on the financing needs of non-SOEs, thus inhibiting their digital transformation process; secondly, green credit policies usually require companies to take more steps in environmental compliance to qualify for loans. Non-state-owned enterprises may need more time and resources to meet these requirements, and thus may face greater resistance in the digital transformation process; finally, state-owned enterprises may enjoy market monopolies or more government support in some cases, which may make them more able to bear the costs of digital transformation. In contrast, non-State-owned enterprises may operate in more competitive market environments and be more vulnerable to green credit policies, as digital transformation requires greater capital investment.

https://doi.org/10.1371/journal.pone.0307722.t008

Whether the enterprise holds shares in the bank.

In this paper, firms holding bank shares and firms not holding bank shares are regressed separately. The results show that the inhibition effect of green credit policies on the digital transformation of non-state-owned enterprises is significantly higher than that of state-owned enterprises. The possible explanations are as follows: firstly, that the green credit policy may impose stricter environmental requirements on heavily polluting firms that do not hold bank shares by strengthening loan approval criteria, thereby limiting their access to funds for digital transformation. In contrast, firms that hold bank shares may be more likely to fulfill the conditions of green credit policies due to closer relationships with financial institutions such as banks. Secondly, firms with different shareholding structures may adopt different strategies in responding to green credit policies. Firms that do not hold bank shares may be more inclined to adopt a strategy of directly confronting environmental requirements by adapting their production and management practices to reduce environmental impacts, while relatively slowing down the pace of digital transformation. In contrast, firms with bank holdings may be more likely to obtain funding through green credits and thus invest more aggressively in digital transformation in order to adapt to environmental trends.

Conclusions and policy recommendations

Based on “the Green Credit Guidelines” issued in 2012, this paper selects China’s manufacturing A-share listed companies from 2008 to 2022 as the research sample. Based on the existing research, this paper uses the DID method to investigate and evaluate the impact of green credit policies on the digital transformation of heavily polluting enterprises. The research results show that: Firstly, the green credit policy, represented by “the Green Credit Guidelines”, has a significant inhibitory effect on the digital transformation of heavily polluting enterprises. Secondly, from the perspective of the adjustment mechanism, the R&D investment and the financial background of senior executives weaken the inhibition effect of “the Green Credit Guidelines” on the digital transformation of heavily polluting enterprises, and when the R&D investment is low, the inhibitory effect of the policy is more obvious, but with the increase of enterprise R&D investment, the inhibitory effect of the policy gradually decreases, that is, the R&D investment of enterprises and the Guidelines have an obvious substitution relationship in affecting the digital transformation of heavily polluting enterprises. Thirdly, “the Green Credit Guidelines” has a significantly stronger inhibitory effect on the digital transformation of non-SOE heavy polluting enterprises than that of SOEs; it has a significant inhibitory effect on the digital transformation of heavy polluting enterprises that do not hold shares in a bank, while the effect on heavy polluting enterprises that hold shares in a bank is insignificant.

Based on the above conclusions, this paper puts forward the following policy recommendations from the perspectives of government and enterprises.

On the one hand, the government should launch a special digital transformation loan program to provide heavily polluting enterprises with preferential conditions such as low interest rates and extended repayment periods, so as to ensure that they receive adequate financial support in the process of digital transformation. At the same time, the government should encourage enterprises to increase R&D investment, such as through tax incentives and scientific research funding support, to encourage enterprises to increase R&D investment in the field of digitalization. Flexibly adjust the green credit conditions according to the level of enterprise R&D investment, and provide more flexible credit support for enterprises with low R&D investment. In addition, the government should implement differentiated green credit policies. Formulate differentiated policies according to the nature and shareholding of enterprises, and promote close cooperation between non-state-owned enterprises and non-bank shares and financial institutions to ensure that these enterprises can obtain favorable financial support. On the other hand, enterprises should actively apply for the government’s digital transformation loan program to take advantage of low interest rates and flexible repayment terms to reduce financing pressure and ensure the funds needed for digital upgrading. At the same time, enterprises should increase R&D investment and increase digital technology R&D and innovation activities to improve their competitiveness. In addition, enterprises should pay attention to financial literacy training such as digital literacy of senior executives, and encourage enterprises to participate in training programs to enhance their understanding and support for digital transformation. Finally, companies should optimize their financing structures and strengthen financial cooperation. Specifically, non-state-owned enterprises should explore flexible financing methods and establish close cooperation with financial institutions to obtain favorable financial support. Companies with bank stakes should optimize their financing structures and leverage their banking relationships to obtain better financing conditions to support digital transformation.

Supporting information

https://doi.org/10.1371/journal.pone.0307722.s001

Acknowledgments

We would like to express my sincere thanks to the editors and reviewers of the magazine. Thank you for your meticulous review of my manuscript and your valuable comments during your busy schedule. Your professional insights and constructive suggestions have greatly improved the quality and scientific of this paper, and provided important guidance for the refinement and improvement of this study. We have benefited greatly from your hard work and patience in the course of my research. We know that your valuable time and energy play an important role in advancing academic research and knowledge. Therefore, we would like to express my heartfelt respect and gratitude to you for your selfless dedication.

Thank you again for your attention and support to my manuscript, and look forward to your continued guidance and help in the future.

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Fact-checking warnings from Democrats about Project 2025 and Donald Trump

This fact check originally appeared on PolitiFact .

Project 2025 has a starring role in this week’s Democratic National Convention.

And it was front and center on Night 1.

WATCH: Hauling large copy of Project 2025, Michigan state Sen. McMorrow speaks at 2024 DNC

“This is Project 2025,” Michigan state Sen. Mallory McMorrow, D-Royal Oak, said as she laid a hardbound copy of the 900-page document on the lectern. “Over the next four nights, you are going to hear a lot about what is in this 900-page document. Why? Because this is the Republican blueprint for a second Trump term.”

Vice President Kamala Harris, the Democratic presidential nominee, has warned Americans about “Trump’s Project 2025” agenda — even though former President Donald Trump doesn’t claim the conservative presidential transition document.

“Donald Trump wants to take our country backward,” Harris said July 23 in Milwaukee. “He and his extreme Project 2025 agenda will weaken the middle class. Like, we know we got to take this seriously, and can you believe they put that thing in writing?”

Minnesota Gov. Tim Walz, Harris’ running mate, has joined in on the talking point.

“Don’t believe (Trump) when he’s playing dumb about this Project 2025. He knows exactly what it’ll do,” Walz said Aug. 9 in Glendale, Arizona.

Trump’s campaign has worked to build distance from the project, which the Heritage Foundation, a conservative think tank, led with contributions from dozens of conservative groups.

Much of the plan calls for extensive executive-branch overhauls and draws on both long-standing conservative principles, such as tax cuts, and more recent culture war issues. It lays out recommendations for disbanding the Commerce and Education departments, eliminating certain climate protections and consolidating more power to the president.

Project 2025 offers a sweeping vision for a Republican-led executive branch, and some of its policies mirror Trump’s 2024 agenda, But Harris and her presidential campaign have at times gone too far in describing what the project calls for and how closely the plans overlap with Trump’s campaign.

PolitiFact researched Harris’ warnings about how the plan would affect reproductive rights, federal entitlement programs and education, just as we did for President Joe Biden’s Project 2025 rhetoric. Here’s what the project does and doesn’t call for, and how it squares with Trump’s positions.

Are Trump and Project 2025 connected?

To distance himself from Project 2025 amid the Democratic attacks, Trump wrote on Truth Social that he “knows nothing” about it and has “no idea” who is in charge of it. (CNN identified at least 140 former advisers from the Trump administration who have been involved.)

The Heritage Foundation sought contributions from more than 100 conservative organizations for its policy vision for the next Republican presidency, which was published in 2023.

Project 2025 is now winding down some of its policy operations, and director Paul Dans, a former Trump administration official, is stepping down, The Washington Post reported July 30. Trump campaign managers Susie Wiles and Chris LaCivita denounced the document.

WATCH: A look at the Project 2025 plan to reshape government and Trump’s links to its authors

However, Project 2025 contributors include a number of high-ranking officials from Trump’s first administration, including former White House adviser Peter Navarro and former Housing and Urban Development Secretary Ben Carson.

A recently released recording of Russell Vought, a Project 2025 author and the former director of Trump’s Office of Management and Budget, showed Vought saying Trump’s “very supportive of what we do.” He said Trump was only distancing himself because Democrats were making a bogeyman out of the document.

Project 2025 wouldn’t ban abortion outright, but would curtail access

The Harris campaign shared a graphic on X that claimed “Trump’s Project 2025 plan for workers” would “go after birth control and ban abortion nationwide.”

The plan doesn’t call to ban abortion nationwide, though its recommendations could curtail some contraceptives and limit abortion access.

What’s known about Trump’s abortion agenda neither lines up with Harris’ description nor Project 2025’s wish list.

Project 2025 says the Department of Health and Human Services Department should “return to being known as the Department of Life by explicitly rejecting the notion that abortion is health care.”

It recommends that the Food and Drug Administration reverse its 2000 approval of mifepristone, the first pill taken in a two-drug regimen for a medication abortion. Medication is the most common form of abortion in the U.S. — accounting for around 63 percent in 2023.

If mifepristone were to remain approved, Project 2025 recommends new rules, such as cutting its use from 10 weeks into pregnancy to seven. It would have to be provided to patients in person — part of the group’s efforts to limit access to the drug by mail. In June, the U.S. Supreme Court rejected a legal challenge to mifepristone’s FDA approval over procedural grounds.

WATCH: Trump’s plans for health care and reproductive rights if he returns to White House The manual also calls for the Justice Department to enforce the 1873 Comstock Act on mifepristone, which bans the mailing of “obscene” materials. Abortion access supporters fear that a strict interpretation of the law could go further to ban mailing the materials used in procedural abortions, such as surgical instruments and equipment.

The plan proposes withholding federal money from states that don’t report to the Centers for Disease Control and Prevention how many abortions take place within their borders. The plan also would prohibit abortion providers, such as Planned Parenthood, from receiving Medicaid funds. It also calls for the Department of Health and Human Services to ensure that the training of medical professionals, including doctors and nurses, omits abortion training.

The document says some forms of emergency contraception — particularly Ella, a pill that can be taken within five days of unprotected sex to prevent pregnancy — should be excluded from no-cost coverage. The Affordable Care Act requires most private health insurers to cover recommended preventive services, which involves a range of birth control methods, including emergency contraception.

Trump has recently said states should decide abortion regulations and that he wouldn’t block access to contraceptives. Trump said during his June 27 debate with Biden that he wouldn’t ban mifepristone after the Supreme Court “approved” it. But the court rejected the lawsuit based on standing, not the case’s merits. He has not weighed in on the Comstock Act or said whether he supports it being used to block abortion medication, or other kinds of abortions.

Project 2025 doesn’t call for cutting Social Security, but proposes some changes to Medicare

“When you read (Project 2025),” Harris told a crowd July 23 in Wisconsin, “you will see, Donald Trump intends to cut Social Security and Medicare.”

The Project 2025 document does not call for Social Security cuts. None of its 10 references to Social Security addresses plans for cutting the program.

Harris also misleads about Trump’s Social Security views.

In his earlier campaigns and before he was a politician, Trump said about a half-dozen times that he’s open to major overhauls of Social Security, including cuts and privatization. More recently, in a March 2024 CNBC interview, Trump said of entitlement programs such as Social Security, “There’s a lot you can do in terms of entitlements, in terms of cutting.” However, he quickly walked that statement back, and his CNBC comment stands at odds with essentially everything else Trump has said during the 2024 presidential campaign.

Trump’s campaign website says that not “a single penny” should be cut from Social Security. We rated Harris’ claim that Trump intends to cut Social Security Mostly False.

Project 2025 does propose changes to Medicare, including making Medicare Advantage, the private insurance offering in Medicare, the “default” enrollment option. Unlike Original Medicare, Medicare Advantage plans have provider networks and can also require prior authorization, meaning that the plan can approve or deny certain services. Original Medicare plans don’t have prior authorization requirements.

The manual also calls for repealing health policies enacted under Biden, such as the Inflation Reduction Act. The law enabled Medicare to negotiate with drugmakers for the first time in history, and recently resulted in an agreement with drug companies to lower the prices of 10 expensive prescriptions for Medicare enrollees.

Trump, however, has said repeatedly during the 2024 presidential campaign that he will not cut Medicare.

Project 2025 would eliminate the Education Department, which Trump supports

The Harris campaign said Project 2025 would “eliminate the U.S. Department of Education” — and that’s accurate. Project 2025 says federal education policy “should be limited and, ultimately, the federal Department of Education should be eliminated.” The plan scales back the federal government’s role in education policy and devolves the functions that remain to other agencies.

Aside from eliminating the department, the project also proposes scrapping the Biden administration’s Title IX revision, which prohibits discrimination based on sexual orientation and gender identity. It also would let states opt out of federal education programs and calls for passing a federal parents’ bill of rights similar to ones passed in some Republican-led state legislatures.

Republicans, including Trump, have pledged to close the department, which gained its status in 1979 within Democratic President Jimmy Carter’s presidential Cabinet.

In one of his Agenda 47 policy videos, Trump promised to close the department and “to send all education work and needs back to the states.” Eliminating the department would have to go through Congress.

What Project 2025, Trump would do on overtime pay

In the graphic, the Harris campaign says Project 2025 allows “employers to stop paying workers for overtime work.”

The plan doesn’t call for banning overtime wages. It recommends changes to some Occupational Safety and Health Administration, or OSHA, regulations and to overtime rules. Some changes, if enacted, could result in some people losing overtime protections, experts told us.

The document proposes that the Labor Department maintain an overtime threshold “that does not punish businesses in lower-cost regions (e.g., the southeast United States).” This threshold is the amount of money executive, administrative or professional employees need to make for an employer to exempt them from overtime pay under the Fair Labor Standards Act.

In 2019, the Trump’s administration finalized a rule that expanded overtime pay eligibility to most salaried workers earning less than about $35,568, which it said made about 1.3 million more workers eligible for overtime pay. The Trump-era threshold is high enough to cover most line workers in lower-cost regions, Project 2025 said.

The Biden administration raised that threshold to $43,888 beginning July 1, and that will rise to $58,656 on Jan. 1, 2025. That would grant overtime eligibility to about 4 million workers, the Labor Department said.

It’s unclear how many workers Project 2025’s proposal to return to the Trump-era overtime threshold in some parts of the country would affect, but experts said some would presumably lose the right to overtime wages.

Other overtime proposals in Project 2025’s plan include allowing some workers to choose to accumulate paid time off instead of overtime pay, or to work more hours in one week and fewer in the next, rather than receive overtime.

Trump’s past with overtime pay is complicated. In 2016, the Obama administration said it would raise the overtime to salaried workers earning less than $47,476 a year, about double the exemption level set in 2004 of $23,660 a year.

But when a judge blocked the Obama rule, the Trump administration didn’t challenge the court ruling. Instead it set its own overtime threshold, which raised the amount, but by less than Obama.

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The Effect of Emergency Financial Assistance on Employment and Earnings

We examine the labor supply effects of short-term income transfers for families experiencing a housing crisis. We link callers of an emergency assistance homelessness prevention hotline to their federal tax records and measure their employment & earnings in years surrounding their calls. Our methodology exploits quasi-random variation in the availability of assistance to compare similar families receiving and not receiving funds. Looking up to four years post-assistance, we find evidence, especially for the lowest earners, of earnings and employment gains, and overall we find no evidence that assistance lowers earnings or employment. Our results indicate that any income effect of temporary transfers for those in crisis is minimal and that these transfers may convey labor market benefits for the poorest of the poor.

Any opinions and conclusions expressed herein are those of the authors and do not represent the views of the U.S. Census Bureau. The Census Bureau has ensured appropriate access and use of confidential data and has reviewed these results for disclosure avoidance protection (Project 7523252: CBDRB-FY23-0267 and CBDRB-FY24-0033). Work on this paper was completed while Rinz was an employee of the U.S. Census Bureau. This research was supported by the University of Notre Dame’s Wilson Sheehan Lab for Economic Opportunities (LEO). We also appreciate the cooperation and help of Catholic Charities of the Archdiocese of Chicago and its Homelessness Prevention Call Center with special thanks to Kathy Donohue. One of the authors (Sullivan) has a first-cousin once-removed who is employed by Catholic Charities Chicago; this employee was not involved in the launch of the project nor did she have any role in the design of the study or in any of the analyses. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.

MARC RIS BibTeΧ

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August 2024 - AACRAO's first Green Paper for the LEARN Commission, Learner Perceptions of Educational Quality, and How Learners and Faculty Perceive the Effect of AI on Academic Integrity

Dr. wendy kilgore |, august 27, 2024.

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August, 2024 Eye on Research

Commentary The AACRAO and SOVA partnership on the LEARN Commission is opening new avenues for AACRAO to contribute to the higher-education dialogue on credit mobility. Our role as SOVA’s partner involves crafting four green papers to inform the Commission's work, each tackling a crucial aspect of this complex issue.

We have released our first paper, which delves into transforming traditional credit evaluation . In September, our second paper will offer the Commission fresh perspectives on credit for prior learning. The third paper will explore the intricate landscape of dual-enrollment credits. This topic is pertinent because 20% of all community-college learners are still in high school . Interestingly, some institutions of higher education (IHEs) still maintain credit-acceptance policies that do not recognize college credits earned during high-school years. Our fourth, and final, paper will examine how technology (with a focus on AI) can support and enhance credit mobility.

As I immerse myself in research from diverse fields to shape these green papers, my thoughts often drift back to my time as a doctoral student. It's fascinating to see how that experience has guided me to where I am today. I feel privileged to serve in this role and sincerely hope my work proves valuable in your own endeavors. I'm always eager to hear your thoughts. If there's a particular topic you believe AACRAO Research should explore in 2025, please reach out to me at [email protected].

AACRAO Research Update

Our research initiatives continue to make strides. Our first green paper  for the LEARN Commission marks a significant milestone in our ongoing work.

We recently finalized the 2024 Registrar Career Profile survey, gathering insights from 695 individuals across U.S. institutions. Many respondents generously offered to share their career-journey stories, which will add a rich, personal dimension to the report. Watch for this comprehensive analysis, set to be released in late fall.

Looking ahead to early September, our primary contacts can expect to receive the dual-enrollment survey. Data from this survey will help shape our upcoming green paper on the topic. We're collaborating with NACEP and CCRC to ensure our survey content is comprehensive and reflects the latest developments in the field.

In other news, Ithaka S+R and AACRAO have just concluded a series of enlightening roundtable discussions with member volunteers. These conversations centered on the new federal regulation concerning transcript holds. Building on these discussions, we are now crafting a white paper that will provide valuable insights into this important issue.

Additionally, we're making progress on Part 2 of our report examining the anticipated impact of the transcript-hold regulation on institutions and learners. Part 1 focused on data from states without similar existing regulations. Part 2 will focus on states that already have comparable measures in place. This dual perspective promises to offer a nuanced understanding of the regulation's potential effects across different contexts.

AACRAO Resource Spotlight

We're excited to introduce a new semiregular feature in our monthly Eye on Research blog: the "AACRAO Resource Spotlight." This section will highlight the wealth of resources available to our members, many of which you might not be aware of or have forgotten over time.

In light of the frequent policy-related inquiries we see on the AACRAO Exchange, our inaugural spotlight falls on the AACRAO Higher Ed Policy Database . This valuable resource contains policies from over 1,000 institutions, covering catalogs from 2018 to the present, with annual updates to ensure currency.

Access to this resource is a benefit of AACRAO membership. If you are not yet a member and are interested in accessing this and other valuable resources, we offer various membership options to suit your needs.

Stay tuned for future spotlights as we continue to showcase the diverse array of tools and resources AACRAO provides to support your professional development and institutional needs.

Current Higher-Education Research and Related Topics

NACUBO Report Outlines Blueprint for Learner-Centered Strategic Finance A new report from the National Association of College and University Business Officers (NACUBO) presents a model for integrating learner-success initiatives with institution-wide finance plans. Charting the Future: NACUBO's Blueprint for Student-Centered Strategic Finance offers a flexible framework to help chief business officers (CBOs) improve learner outcomes through strategic financial practices. Core elements of the model include the following.

The model emphasizes six "Strategic Impacts" 

Three focus areas are identified: data infrastructure and analytics, financial-resource optimization and learner-centered planning and budgeting.

The framework is adaptable to each institution's unique needs; customizable toolkits are available through the NACUBO Student Success Hub.

The model promotes interdisciplinary collaboration and data-informed decision making to align resource allocation with improved learner outcomes, particularly for underserved populations.

Study Finds Institutions Should Focus More on Personal Reasons for Stop-Outs  A new report from CAEL examines some of the challenges faced by adult learners in postsecondary education, highlighting the high rates of stopping out and longer completion times compared to traditional learners. It determined these issues are primarily due to personal circumstances rather than academic difficulties, suggesting institutions need to adapt to better accommodate adult learners' needs. Key points include:

nearly 50% of respondents report taking a break during their current enrollment

the most common reasons for stopping out include work commitments, emotional stress/mental-health issues and healthcare concerns

financial constraints and unexpected expenses were prevalent factors in stopping out 

academic issues were least cited as reasons for stopping out

demographic factors, such as gender and parental status, influence the likelihood of stopping out; men and parents were more likely to take breaks 

Learner Perceptions of Educational Quality Examined in Student Voice Survey A new report on the Student Voice Survey data focuses on learners' perceptions of educational quality in higher education, highlighting variations based on institution type, region and learner characteristics. While the majority of learners rate their education positively, there are notable differences among various demographic and institutional factors. The full interactive survey report is available here . Key features of the report include:

private, nonprofit institution learners are more likely to rate their education as excellent 

regional differences exist; New England learners rate their education quality as highest and far West learners rate it as lowest

family income correlates with higher ratings of educational quality; wealthier learners rate their education as excellent

older learners (25+) rate their educational quality higher than younger learners

course modality impacts perceptions; in-person classes receive higher quality ratings than online classes

Data from the Student Voice Survey Focuses on Affordability This article from Inside Higher Ed discusses the findings of the Student Voice survey relating to college affordability. Data reveals college affordability is a significant concern for learners across various demographic groups and income levels. The study highlights the widespread impact of tuition costs on academic success and explores the complexities of college affordability beyond sticker prices and average net prices. Key points include the following.

The majority of learners, regardless of income level, identified making tuition more affordable as the primary action institutions could take to promote their academic success.

Net prices for public and private institutions have increased, with affordability being particularly acute for lower- and middle-income learners.

Learners across income levels report financial stress related to college costs, though the severity varies along a continuum.

The lack of transparency in higher-education costs complicates learners' decision-making processes and has implications for public policy.

Experts suggest institutions streamline financial-aid processes, offer loan counseling and provide clear information about college costs and available resources.

Policy recommendations include increasing funding for financial-aid programs and adopting equitable free-college initiatives to improve overall college affordability.

Learner-Success Initiatives Examined Over a 3-Year Period A new report (full report requires login) from Civitas Learning analyzes the effectiveness of learner-success initiatives at partner institutions. It examines long-term trends since summer 2021 and recent trends from 2023. See Figure 1. The report emphasizes the importance of data-driven decision making in designing, implementing and maintaining successful learner-support programs to enhance persistence and institutional success. Key points include:

highlights the "Student Impact Gap" concept

focuses on the necessity of institutions analyzing their own data to address unique learner-population needs

emphasizes the importance of regular program assessment to determine effective support methodologies to plan future initiatives, allocate resources and align efforts across institutional departments

suggests a focused, sustained approach to analyzing initiative effectiveness can lead to long-term positive outcomes in learner-success interventions

Figure 1: 10 Most Successful Types of Student Success Interventions During this Three-year Period (“PP” is percentage points)

Source: “Student Success Impact Report.” Civitas Learning, 2024. Civitas Learning Report . 

Report Examines Changing Global Landscape of Employability Skills  Key findings from Coursera’s Global Skills Report 2024 (login required) highlight trends in skills development and learning across various regions. The report emphasizes the growing importance of AI literacy, the persistence of digital-skills gaps and the evolving landscape of cybersecurity and microcredentials in the global workforce. Key points include the following.

There is a global surge in AI literacy; regional variations occur in the depth of AI-skill development.

A persistent digital AI-skills gap exists, despite increasing demand in most jobs.

Cybersecurity skills remain crucial, but enrollment growth should also focus on other high-growth areas, such as cloud computing and data science.

Microcredentials are increasingly popular as rapid pathways for learners to prepare for in-demand jobs.

The gender gap in online learning is narrowing, though regional disparities persist.

How Learners and Faculty Perceive the Effect of AI on Academic Integrity New research from Wiley (login and download required) focuses on the challenges faced by educators in maintaining academic integrity amidst the rise of AI tools, hybrid learning models and increased learner cheating. The report details a survey conducted to explore the perspectives of instructors and learners on these issues, particularly focusing on the impact of AI on education and academic integrity. See Figure 2. 

The study surveyed 850 instructors and 2,067 students on academic-integrity challenges. Research aimed to understand learner and instructor attitudes toward AI in education and whether AI enhances learning or negatively impacts academic integrity. The study examined factors contributing to rising rates of cheating, including time constraints and performance pressures. It also investigated the adoption of AI tools by instructors in their teaching practices.

Source: “The Latest Insights into Academic Integrity: Instructor & student experiences, attitudes, and the impact of AI,” 2024. Academic Integrity Report .

Report on Graduate Employability Highlights Practical Skills and Generative AI The 2024 Graduate Employability Report from Cengage discusses the misalignment between higher education and workforce needs, highlighting challenges faced by employers in finding suitable talent and the underutilization of graduates' skills in their jobs. The report also highlights the shift in perceptions of recent graduates regarding the value of education. See Figure 3. It emphasizes the need for education systems to adapt to changing workforce demands, particularly through the integration of practical skills and emerging technologies, such as generative AI (GenAI). Key points include the following.

There is a significant mismatch between graduate skills and job-market demands, with 52% of new graduates working in jobs that do not use their degrees.

Federal, state and educational institutions are making significant efforts to align education with workforce needs.

The value proposition of higher education is shifting toward practical, job-ready skills alongside traditional academic credentials.

There is an increasing focus on experiential learning and the incorporation of GenAI into curricula.

Community-college enrollment across the United States has surged, indicating a growing interest in career and technical education.

Collaboration between educational institutions and industry partners is needed to prepare graduates for the GenAI-driven workforce.

Generative AI Appears Less Useful as a Tutoring Tool than Predicted An article published by Axios examines the impact of using generative AI (GenAI) tools on the academic performance of high-school learners preparing for math exams. Findings suggest GenAI “tutors” can improve learners' performances on practice problems, but learners tend to use the tools as a crutch. This can lead to significantly worse performance on actual exams when learners cannot rely on AI. Cautious, guided deployment of GenAI in educational settings to ensure learners continue developing critical skills is essential. Other key points include the following.

Learners often use GenAI to copy and paste answers, which leads to less engagement with the material.

Experts recommend deploying GenAI cautiously and guiding learners on how to use tools effectively; even small changes to prompts can improve learner interactions.

GenAI tutors could be beneficial in areas with teacher shortages.

Motivating learners to engage with the material remains a challenge.

Finding ways to balance the democratizing potential of GenAI with the need to maintain learner learning and skill development is important.

Report Examines Academic Freedom in the Current Political Climate A report from ITHAKA S+R presents findings from a national survey of U.S. instructors at 4-year colleges and universities, focusing on academic freedom and censorship concerns in higher education. The study was conducted amidst the backdrop of protests related to the war in Gaza and the political and legislative actions that affected academic institutions. It seeks to understand instructors' experiences and attitudes toward discussing controversial topics in the classroom. Key points include the following.

The majority of instructors do not report feeling unsafe or uncomfortable discussing sensitive topics, though some variations were noted, based on institutional type, discipline and demographics.

A small percent of instructors avoid teaching or discussing controversial topics, with Middle East conflicts and abortion/contraception being the most-avoided subjects.

Nearly 33% of instructors report no academic-freedom challenges.

Instructors seeking support desire frameworks for engaging students on sensitive issues or understanding institutional responses to new policies.

Instructors are more likely to turn to peers for support rather than their institution.

Opinions are mixed regarding an institution's ability to foster constructive conversations on sensitive issues.

Learner Choice in Attendance and Assessments May Lead to Improved Performance This research article published in Science Adviser and supported by Carnegie Mellon University, presents findings from two studies exploring the impact of autonomy-supportive policies on learner performance and engagement in higher education. Research demonstrates that providing learners with choices in attendance requirements and assessment options can lead to improved outcomes in classroom attendance and subject mastery. Key points include the following.

Studies address a gap in empirically tested interventions for promoting learner autonomy in higher education.

A randomized controlled field study showed that allowing students to choose whether to make attendance mandatory increased their likelihood of attending class.

A multiyear cohort study revealed giving learners the option to opt out of a challenging assessment stream resulted in greater effort investment and improved proficiency.

Increased autonomy may enhance learner motivation and achievement.

Choice architecture principles can be applied more broadly to improve learning, motivation and well-being in higher education settings.

Study Explores the Effects of Incorporating Inclusive Practices in Syllabi  A new study published in Nature’s Humanities and Social Sciences Communications journal examines the use of inclusive practices in course syllabi at a STEM institution. The study investigated the extent to which syllabi list instructors' pronouns, use readings and materials authored by women and gender-minority scholars, and contain inclusivity statements. The research combines an analysis of 163 syllabi and an undergraduate-learner survey to understand the relationship between learner expectations and actual syllabi content. Key points of the study include:

explores the importance of inclusive syllabi design, particularly for marginalized learners in STEM courses

analysis of syllabi and learner-survey data reveals significant differences between learners' expectations and the actual content of syllabi

learners desire more inclusive practices in course development, regardless of subject; faculty implementation of these practices lags behind these desires

provides suggestions for incorporating inclusive practices into syllabi design and proposes further questions for exploration

the need for greater alignment between learner needs and faculty practices in creating inclusive learning environments is highlighted

Survey Examines How to Attract, Engage, and Retain Learners A new study presents the findings of a survey conducted by Modern Campus and Higher Ed Dive, which gathered insights from over 700 institutions and undergraduates across North America. The survey report discusses the pressing challenge faced by higher-education leaders in attracting, engaging and retaining learners, particularly in the face of declining undergraduate-enrollment trends. Key points include the following.

Undergraduate enrollment has declined more than 12% since its peak in 2010, leading institutions to sharpen their recruiting and retention strategies.

Traditional-age college learners now share many priorities with adult learners, especially concerning degree planning and career pathways.

Institutions can improve their communication and personalization of the prospective learner's online experience.

Institutions need to support learners after they have enrolled to keep up with changing learner demographics and needs.

Three practical steps higher-education leaders can take to maintain the viability of their institutions in a highly competitive environment are highlighted.

An institution must understand and adapt to the evolving needs and preferences of the learner population.

Report on Latest Changing Landscape of Online Education Released This report is the ninth installment of the Changing Landscape of Online Education (CHLOE) series from Quality Matters™. It provides an overview of the current state, and future development, of online learning in higher education. Based on a survey of chief online officers at 2-year and 4-year U.S. colleges and universities, the report highlights trends and challenges in the online learning landscape. Key findings include the following.

Institutions are prioritizing the development of online versions of on-campus courses and degree programs to meet growing learner demand.

Most institutions charge the same tuition for online and traditional face-to-face learning, with many public 4-year institutions generating net revenue from online programs.

Institutions are taking varied approaches to addressing the presence and potential use of AI in higher education; about 33% have AI-related policies in place.

The adoption of third-party service providers, such as Online Program Management (OPM) is increasing, despite uncertainty around new federal regulations targeting these partnerships.

The majority of institutions have, or are considering, Regular and Substantive Interaction  (RSI) policies and guidelines.

Public institutions are more likely to have RSI policies and guidelines in place than private institutions.

Institutions provide varying levels of faculty support to meet RSI requirements.

A significant number of institutions do not evaluate courses to determine if RSI standards have been met.

The ongoing evolution and challenges of the online learning landscape in higher education are highlighted.

Study Examines the Implementation and Impact of “Free College” Programs This study investigates the impact of two similar community-college tuition-guarantee programs in Pennsylvania on college-attending outcomes. Using learner-level data, the research explores how these "free college" initiatives affect college attendance, degree attainment and student trajectories. The Morgan Success Scholarship program has significant positive impacts on community college attendance and associate-degree completion. The program temporarily diverts students from 4-year college enrollment, though this effect diminishes over time. In contrast, the Community College of Philadelphia's 50th Anniversary Scholars program shows little evidence of any impact on college-attendance behavior.

Key findings of the study include:

the design and implementation details of "free college" programs can play a crucial role in determining their effectiveness

insights and suggestions for policymakers and practitioners in designing and evaluating the impact of similar college-affordability initiatives are offered

research highlights the importance of rigorous, learner-level data analysis in understanding the nuanced effects of "free college" programs on college access, enrollment and completion

findings underscore the need for careful program design and evaluation to ensure "free college" initiatives achieve their intended goals of improving college access and success

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• Have CEOs Changed?

There is a sense in the media and among some academics that CEOs and top executives today should focus more on softer and interpersonal skills . In prior research , Steven N. Kaplan and Morten Sorensen use CEO personality assessments to show that CEO candidates with greater interpersonal skills are more likely to be hired. In this study, the authors expand on this earlier work and examine whether the characteristics and objectives of CEOs and top executives have changed over time.  

The authors use a sample of over 4,900 executive assessments covering the twenty-year period from 2000 to 2019. The assessments, which are often requested by investors as part of due diligence evaluating a company, contain a detailed description of candidates’ background and personality, including ratings for approximately thirty specific characteristics. The authors analyze the assessments using a method called factor analysis factor analysis : A statistical method used to reduce the number of variables and identify patterns by grouping variables into factors , which they detail in their working paper . They find the following:

• The most common characteristics among the assessed CEOs in the authors’ sample can be grouped into four underlying traits, which capture roughly half of the variation in the characteristics. They include candidates’ overall ability, whether they are more execution oriented and less interpersonal, more analytical and less charismatic, and more creative and less detail oriented.  
• Compared to the period before 2009, the average CEO candidate assessed during or after 2009 has lower overall ability, and is more execution-oriented and less interpersonal, more analytical and less charismatic, and more detail-oriented and less creative/strategic.
• CEO candidates who are hired to become CEOs (as opposed to those who are merely interviewed) also tend to be more analytical and less charismatic as well as more detail oriented and less creative after 2009. At the same time, they are similar in overall ability and interpersonal orientation compared to CEOs hired before 2009, suggesting “soft skills” have not necessarily increased.
• Higher-ability executives appear to complement each other. There is a strong positive correlation between the ability of assessed CEOs and the abilities of other C-level executives assessed for positions in the same hiring company.
• Finally, the authors examine the relationship between the objectives for which CEOs are interviewed (most of the assessments include the objectives and challenges facing the hiring companies) and CEO characteristics. They find an increase in demand for CEOs with skills in organic growth, operations and strategy, and a decrease in demand for CEOs with skills in staffing.   They also find a modest relation between the desired objectives and the characteristics of the assessed and hired CEO candidates.  

Contrary to a rising sense among academics and the media, this research does not reveal an increase in the importance of interpersonal skills for hired CEOs. Instead, the authors reveal an apparent deterioration in the supply of executive candidates in terms of their general ability and creative/strategic skills. The reasons driving these supply trends present an interesting question for future research.

• Steven Neil Kaplan