Pioneering green-finance in developing markets: empirical insights from the banking sector in Pakistan

Purpose The rise of green finance and sustainable investment has become increasingly popular in relation to the Sustainable Development Goals. Nonetheless, there remains a lack of research focusing on the influence of various aspects of green finance on the sustainable performance (SP) of banks, especially in developing countries like Pakistan. This study aims to address this gap by delving into the green finance dimensions and their impacts on the sustainable performance of banks within the country. Design/methodology/approach This research also investigates the extent of adoption of green finance by both banks throughout the period between 2018 and 2022. To achieve its research objectives, the study uses the structural equation modeling technique, given the nature of the data set. Findings The findings reveal that private commercial banks play a leading role in green finance, accounting for 80% of the entire green finance in Pakistan. Moreover, the study establishes a positive correlation between the green finance dimensions and the economic (EC) and social (SO) characteristics of the Sustainable Development Goals. It highlights the substantial influence of the SO and EC dimensions of green finance in enhancing the SP of banks. Significantly, an impressive 93% of bankers acknowledge the importance of green financing in shaping their short- and long-term banking strategies in Pakistan. Research limitations/implications This finding highlights the critical role of green finance in advancing the sustainable performance of financial institutions in developing economies like Pakistan. Originality/value This study makes a valuable and substantial contribution to the current understanding of green finance and its influence on the SP of financial institutions.