Paving the Road for Sustainable Development in Nordic Countries: Do Green Investments Make Difference?

ABSTRACT Paving a sustainable development road for countries by harmonizing economic development and ecological sustainability has become one of the significant tasks for policymakers. To this end, green investments (GI) have gained significance for supporting economic activities while preventing environmental deterioration. However, the former literature provides limited evidence of whether GI is an effective tool for promoting sustainable development. Therefore, the main objective of this study is to investigate how GI, proxied by renewable energy investments (RENI), impacts sustainable development proxied by load capacity factor (LCF) in the Nordic Countries, namely Denmark, Finland, and Sweden, from 2008 M1 to 2020 M6 by using novel Wavelet Transform Coherence (WTC) and Quantile‐on‐Quantile regression (QQR) as a baseline estimator. Quantile regression (QR) is also used to check for robustness. Empirical results of the WTC method show a time‐ and frequency‐based interaction between GI and LCF in Nordic states. The QQR estimation shows that GI can improve and promote sustainable development in Denmark and Finland. At the same time, GI may not have the desired impact on sustainable development in Sweden. QR estimation results imply that the obtained findings are robust. Therefore, promoting GI could be an efficient way to promote sustainable development in Denmark and Finland.