How do socio-demographic factors affect green finance growth?

Hitherto, green finance provides lower returns as compared to their “plain” counterparts, and as such, might be less attractive to financial markets. This study aims to analyse the impact of sociodemographic factors on green finance growth at the national level. We employ a panel-pooled mean group-autoregressive distributive lag (PMG-ARDL) model to assess the long-term influence of selected sociodemographic indicators on government budget allocations for R&D (GBARD) with environmental objectives as a proxy for green finance spanning 21 European countries from 2000 to 2021. Specifically, we investigate the impact of the unemployment rate, population density, gender ratio, ratio of education expenditure to GDP, proportion of the population aged 15-64, and the Gini coefficient on the GBARD with environmental objectives. The core results demonstrate that all the examined indicators exert a positive and statistically significant long-term impact on the allocation of government budgets for the GBARD with environmental objectives, highlighting the critical role of sociodemographic contexts in shaping environmental investment strategies.