The study explores the theoretical foundations and practical dimensions of green finance, emphasizing its role in aligning financial systems with global sustainability goals. Green finance, through instruments such as green bonds, green equity, and sustainability-linked portfolios, has emerged as a transformative mechanism for channeling investments into environmentally responsible projects. The paper critically examines how these instruments not only support climate mitigation and low-carbon development but also yield competitive financial returns, thereby reshaping investor behavior and corporate accountability. A key focus is placed on the intersection between institutional frameworks and individual investment decisions, highlighting the growing significance of ethical banking, ESG funds, and personal financial choices in driving systemic change. The analysis further investigates challenges such as greenwashing, information asymmetry, lack of standardized ESG metrics, and uneven regional adoption that hinder the sector’s full potential. Drawing from diverse theoretical perspectives, the paper argues that the effectiveness of green finance depends on integrating financial innovation, regulatory frameworks, and behavioral insights into a coherent framework. Ultimately, green finance is positioned as both a financial innovation and a paradigm shift, bridging economic growth with ecological responsibility and serving as a critical enabler of the United Nations Sustainable Development Goals (SDGs).
Sharma et al. (Sat,) studied this question.
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