Interconnection between green governance indicator, infrastructure index, and green foreign direct investment in emerging countries

This study investigates the complex, interconnected relationships between green foreign direct investment (FDI), governance quality, and infrastructure development in three major emerging African economies, such as South Africa, Egypt, and Nigeria from 2008 to 2023. Addressing critical gaps in the literature, it employs a novel Three-Stage Least Squares (3SLS) model to treat these variables as endogenous within a system of simultaneous equations, capturing their bidirectional dynamics. The findings reveal that greenfield investment is the dominant driver, accounting for 71.9% of green FDI inflows, strongly supporting the Pollution Halo Hypothesis. Both governance and infrastructure are critical determinants (pivotal), with infrastructure exhibiting a strong direct effect, while governance also operates indirectly by enabling better infrastructure. Crucially, a virtuous cycle is identified: green FDI, particularly via greenfield investments, reciprocally enhances both governance standards and infrastructure quality. The study concludes that attracting transformative green capital requires integrated policies prioritizing new project facilitation, synchronized governance-infrastructure upgrades, and leveraging investments to improve the host environment. This research provides a dynamic, system-level framework for catalyzing sustainable investment, offering significant theoretical and practical contributions towards achieving Sustainable Development Goals in emerging economies.