Green Bonds and Environmental Performance in ASEAN: Evidence on Sustainable Development and CO₂ Emissions

Abstract

This study provides a comprehensive econometric analysis of the impact of green bonds on sustainable development and CO₂ emissions reduction across the Association of Southeast Asian Nations (ASEAN) region. As ASEAN nations navigate the dual challenges of rapid economic growth and increasing environmental pressures, green finance has emerged as a critical mechanism to channel capital towards sustainable projects. Utilizing a panel data approach, this research examines the relationship between green bond issuance and key environmental indicators, including CO₂ emissions per capita and the share of renewable energy. The empirical results suggest a statistically significant, albeit modest, negative association between the growth of the green bond market and CO₂ emissions, indicating their potential role in decarbonization despite the market's nascent stage. Furthermore, the analysis reveals a positive relationship between green bond issuance and the expansion of renewable energy capacity. Notably, the study observes heterogeneity across the region, where mature financial markets exhibit stronger transmission effects. The findings underscore the moderating role of institutional quality and regulatory frameworks in amplifying the environmental efficacy of green bonds. These insights offer critical guidance for policymakers and investors, highlighting the necessity of robust green finance ecosystems to unlock the full potential of green bonds in fostering a sustainable and low-carbon future for the ASEAN region.