Eco-investment efficiency and sectoral dynamics: Insights into sustainable finance strategies for emerging economies

This study evaluates eco-investment efficiency across Singapore’s key economic sectors using a refined general residual investment model. Drawing on 215 firm-year observations from 43 enterprises that issued green bonds between 2017 and 2021, the analysis assesses whether eco-investment levels align with optimal benchmarks. The model integrates conventional financial indicators (e.g., return on equity), sustainability-related metrics (e.g., green bond yield-to-maturity, carbon emissions), and governance mechanisms (e.g., audit quality, board structure, ownership concentration) to capture investment behaviour comprehensively. Findings reveal persistent underinvestment in eco-friendly initiatives within the telecommunications, residential, and international trade sectors, while the banking and finance sector exhibits signs of overinvestment. By disaggregating results by sector, the study highlights how institutional capacity, policy enforcement, and financial maturity shape eco-investment outcomes. Although Singapore is a high-income economy, its structured approach to green financing, regulatory governance, and sustainability disclosures offers transferable insights for emerging economies. Many emerging markets face barriers such as weak environmental regulation, limited access to green capital, and fragmented policy implementation. This study demonstrates how a coherent policy-finance-governance framework can address these challenges, improve investment efficiency, and support low-carbon development. The study contributes a replicable analytical framework and sectoral evidence that can inform policy and financial reform in emerging economies pursuing climate-aligned investment strategies. It also draws attention to the need for targeted financial instruments and governance mechanisms to overcome eco-investment gaps and enhance avenues for sustainable development.