Green finance ecosystem development is associated with stronger SME performance across five Latin American countries

Green finance is increasingly positioned as a central mechanism for aligning economic development with environmental sustainability, yet evidence on whether national green finance ecosystems translate into stronger outcomes for small and medium enterprises remains limited in emerging economies. This study examines the association between green finance ecosystem development and SME performance across Colombia, Mexico, Chile, Costa Rica, and Peru during 2014–2023. Using 50 country-year observations compiled from multilateral sources, the analysis integrates indicators of sustainable finance development, environmental policy stringency, renewable energy adoption, green bond activity, and SME performance. Fixed-effects panel regression is complemented by instrumental-variable estimation and multiple robustness tests. The Green Finance Ecosystem Index (GFEI) is positively associated with SME performance (β = 0.412, p = 0.012), with consistent estimates across alternative specifications. Renewable energy share, green bond volume, and environmental policy stringency also display positive relationships with enterprise outcomes. The findings indicate that green finance ecosystems may function as enabling institutional infrastructure through which sustainability transitions and inclusive enterprise development can advance together. For emerging economies, coordinated financial, environmental, and regulatory frameworks may therefore support both sustainability objectives and the resilience and performance of smaller firms. Given the compact panel (50 country-year observations across five countries), the instrumental-variable model is interpreted as a sensitivity analysis rather than as definitive causal identification, and the study explicitly discusses the resulting limits on statistical power and coefficient precision.