How foreign green finance drives ESG outcomes in the context of global value chains: new insights for Vietnam

Purpose This paper examines the impact of foreign green finance on environmental, social and governance (ESG) metrics in developing economies, with a focus on policy implications for Vietnam in the context of deepening integration in global value chains (GVCs). Design/methodology/approach The study employs a balanced panel dataset covering 85 developing countries over the period 2010–2022. To address common panel data issues such as heteroskedasticity, autocorrelation, cross-sectional dependence and endogeneity, the analysis applies Feasible Generalized Least Squares (FGLS), Panel-Corrected Standard Errors (PCSE) and the System Generalized Method of Moments (GMM). Findings The findings reveal that while carbon-intensive infrastructure development from foreign green finance often leads to increased CO2 emissions, trade openness facilitates access to cleaner technologies and stricter environmental standards. Foreign green finance contributes to social sustainability by creating jobs, enhancing skills and improving social infrastructure, complemented by trade openness that fosters access to global resources and markets. However, equitable human development requires inclusive policies, as rapid economic growth alone is insufficient. Additionally, foreign green finance promotes governance by encouraging transparency and regulatory reforms, while trade openness drives institutional improvements. Nonetheless, economic instability, such as high inflation or erratic growth, poses risks to governance quality. Originality/value This study fills a key gap in the literature by moving beyond aggregate green finance measures to isolate the role of foreign green finance in emerging economies. The paper further shows how trade openness and macroeconomic stability condition these effects, offering policy-interpretable evidence to support sustainable development in Vietnam.