From Loss to Investment: How Environmental Monetary Losses Influence Green Investment in Eastern European <scp>SMEs</scp> ?

ABSTRACT This research investigates the link between environmental monetary losses due to extreme weather events and green investment in Eastern European small and medium enterprises (SMEs) from 2018 to 2020. We study the conditional indirect effect of financial constraints moderated by environmental strategy. Using the generalized structural equation models bootstrap approach, we prove that experiencing environmental monetary losses leads SMEs to adopt more green investments. In addition to this direct effect, our results revealed that financial constraints play a mediating role in this relationship. We also demonstrated that this indirect effect is moderated by adopting an environmental strategy. Accordingly, SMEs that face environmental monetary losses are more disposed to invest in green initiatives, but financial constraints impede the adoption of these sustainable practices. Moreover, our findings suggest that strategic environmental targets can help SMEs to overcome these barriers. Therefore, this study provides managerial and policy implications. Managers should prioritize providing financial resources and environmental strategies towards green investments. Governments are also encouraged to develop green finance policies for Eastern European SMEs to boost green initiatives and reduce environmental monetary losses.