Green Finance Adoption and Sustainable Economic Development: Evidence from ASEAN-5 Countries

Abstract

This study examines the relationship between green finance adoption and sustainable economic development in the ASEAN-5 economies (Indonesia, Malaysia, the Philippines, Thailand, and Vietnam) over the period 2015 to 2024. Drawing on panel data assembled from the Climate Bonds Initiative, the International Renewable Energy Agency, the World Bank World Development Indicators, and the OECD Sustainable Finance database, the study estimates fixed-effects and system generalised method of moments (GMM) models to assess the dual outcomes of real gross domestic product growth and carbon dioxide (CO2) emissions intensity. Empirical results indicate that a one-standard-deviation increase in green bond issuance is associated with a statistically significant rise in GDP growth of 0.42 percentage points (p < 0.01) and a reduction in emissions intensity of 1.7 per cent per year (p < 0.05), conditional on institutional quality. Renewable energy investment exhibits a positive but smaller growth coefficient and a stronger emissions-reducing effect. Country-level heterogeneity is pronounced: the effects are larger and more precisely estimated in Malaysia and Thailand, where regulatory frameworks for sustainable finance are more developed, and weaker in the Philippines and Vietnam, where the green finance ecosystem remains nascent. Robustness checks involving alternative measures, instrumental variable estimation, and sub-period splits corroborate the main findings. The study contributes to the literature on sustainable finance by providing among the first ASEAN-5 panel estimates that jointly evaluate growth and emissions effects, by identifying institutional quality as a salient moderator, and by translating the empirical findings into policy recommendations for the ASEAN Taxonomy for Sustainable Finance, Network for Greening the Financial System (NGFS) participation, and national green bond programmes.