Green Financing and Climate Change Mitigation: The Moderating Role of Policy Effectiveness in Developing Economies

Abstract

The impact of climate change is now an important issue for environment and economy in developing countries and the development of effective financial mechanisms to support climate change mitigation and sustainable development becomes of high importance. This study analyzed the role of green financing in climate change mitigation, analysed the effectiveness of green financing policies, and explored the ways to improve green financial mechanisms in the developing economies. A quantitative cross sectional research design was used and the data were gathered from 300 stakeholders who are involved with environmental finance, sustainable development, banking, government institutions and sectors related to climate change. Descriptive statistics, correlation and regression analysis were used to analyse the data. The results showed that green financing had a significant positive impact on climate change mitigation (β = 0.42, t = 7.85, p < .001), and that the effectiveness of green financing policy (β = 0.35, t = 6.42, p < .001) was also significant. Furthermore, the effectiveness of policies reinforced the link between green financing and climate mitigation (β = 0.18, t = 3.74, p < .001). The model of regression explained 56% of the variance in climate change mitigation (R² = 0.56). The study suggests that well-designed and well-implemented green financing mechanisms (with robust policy, institutional and regulatory support) can drive renewable energy uptake, investment in clean technologies and climate resiliency in developing economies.