Governance and greenwashing in the BRICS: The moderating role of national ESG performance in sustainable finance outcomes

The environmental sustainability of BRICS nations is connected with green finance and national environmental, social, and governance (ESG) performance. However, the fundamental mechanisms that regulate this integration have not been thoroughly examined at a macro level. In a period marked by the continuous war against climate change, it is vital to grasp this process to construct a sustainable economic model consistent with developmental aims and ecological responsibilities. By utilizing FMOLS and CCR estimating techniques, this research examines data from 1998 to 2022 to estimate the influence of green finance and national ESG performance on environmental sustainability. It also explores the link between green finance and national ESG performance among the BRICS nations. Additionally, by employing a moderating effect model, the research evaluates the influence of national ESG performance on the link between green finance and environmental sustainability. The results imply that green finance and national ESG performance significantly help to increase environmental sustainability. The research also demonstrates that green finance is crucial in boosting national ESG performance. In addition, the link between green finance and environmental sustainability is significantly moderated by national ESG performance, which also shows the possibility of greenwashing due to possible conflicts of interest between principal and agent. The results of the robustness testing through DOLS and DK standard error estimate techniques are similarly compatible with the baseline findings. Importantly, this research provides fresh insights into the dynamic linkages among green finance, national ESG performance, and environmental sustainability, offering strategic implications that enable governments, investors, lenders, enterprises, and regulators to make informed decisions.