On the origin of green finance policies

Despite the rising number of green finance policies, the socioeconomic determinants shaping them remain largely unexamined. Drawing from the literature analysing the relationship between regulation, market development and institutional economics, we contend that green finance policy adoption is driven by both market-based and institutional factors. Using a survival analysis approach to understand the levers influencing green finance policy adoption across 188 countries from 2000 to 2019, we find that exposure to the fossil fuel industry predominantly drives the initial issuance of green finance policies. The positive effect of fossil fuel commercial financing on the adoption of green finance policies exists in countries with high and medium climate change awareness levels. Meanwhile, in countries with a low climate change awareness level, fossil fuel government subsidies drive green finance policy adoption. Our study also highlights the role of the financial industry as one of the key actors in the policy cycle of green finance policies via two pathways: (i) affecting financial stability through financing oil and gas companies on primary financial markets and (ii) developing a market for sustainable finance products.