Abstract
The purpose of this paper is to investigate the role of green finance in the achievement of
sustainable economic growth in developing countries. Specifically, this study analyses the impact
of green finance on economic performance, environmental sustainability, and employment in
developing countries. The study employs a quantitative approach, using panel data of 32
developing countries from 2001 through 2023. Panel regression: fixed effects, random effects,
and System Generalized Method of Moments (System GMM) techniques were utilized to address
endogeneity and dynamic relationships among the variables. The results demonstrate that the
effect of green finance on GDP growth is positive and significant in the long-run, while it exerts
a statistically insignificant effect on carbon emissions and a negative effect on employment in the
short-run. This means that the beneficial impacts of green finance on development are not instant
and differ according to specific development goals. Ultimately, green finance serves as a
beneficial yet complicate and conditional instrument towards sustainable development in
developing countries. Governments are advised to improve institutional setting, target and
monitor green investments more effectively and combine green finance with complementary
measures for strengthening the enforcement of environmental policy and enhancing workforce
competencies to maximize its benefits.