Linking Green Finance, Innovation, and Governance to Water Resilience: A PLS-SEM Analysis of Moroccan SMEs

The intensification of water scarcity in Morocco underscores the urgent need to align financial systems with sustainability objectives. Hydraulic small- and medium-sized enterprises (SMEs) that operate in irrigation, pumping, and water-efficient technologies play a critical yet underfunded role in enhancing national water resilience. This research develops an integrated Green Finance–Water Resilience Model (GF-WRM) to empirically assess how green financial instruments improve SMEs’ innovation capacity, governance practices, and water-resilience performance. Employing a mixed-methods explanatory design, this research integrates survey data from 120 Moroccan hydraulic SMEs (2015–2025) with expert validation from a panel of 60 specialists in finance, water governance, and green innovation. Principal Component Analysis (PCA) and Partial Least Squares Structural Equation Modeling (PLS-SEM) in SmartPLS 4.0 were utilized to analyse the data. The results indicate three principal findings. First, access to green finance, including loans, subsidies, and tax incentives, has a strong positive effect on water-resilience performance (β = 0.74, p < 0.001). Second, technological innovation partially mediates this relationship, accounting for 29% of the total effect. Third, governance inclusion and transparency significantly influence sustainable investment behaviour, explaining 34% of its variance (R² = 0.58). The model demonstrates robust fit and reliability (SRMR = 0.046; NFI = 0.907; α = 0.79–0.86). The findings suggest that, despite ongoing constraints such as collateral requirements and policy fragmentation, hybrid financial ecosystems that combine public credit guarantees, climate funds, and governance reforms substantially accelerate technological upgrading and responsible investment among hydraulic SMEs. This research provides a scalable, policy-relevant framework for integrating green finance into adaptive water governance systems, aligned with SDG 6 and Morocco’s Green Generation 2020–2030 strategy.