Green finance for responsible consumption and production: evidence from institutional and macroeconomic dynamics

Purpose This study examines how green finance helps to achieve responsible consumption and production (RCP) through minimizing material pressure on the economy. The study primarily focuses on the role of institutional and macroeconomic factors to make green finance work better for responsible production and consumption. Design/methodology/approach The paper uses a Panel Cross-Sectionally Augmented Autoregressive Distributed Lag (CS-ARDL) model to represent both long-run and short-run relationships. The study uses data of selected nations from the Asia–Pacific region from 2010 to 2024. A novel RCP pressure index is created by principal component analysis using Domestic Material Consumption and Material Footprint. The key explanatory variables are government effectiveness and regulatory quality for institutional conditions; Gross domestic product per capita (GDP) and research and development (R&D) expenditure for macroeconomic controls. Findings The results of the study indicate that strong government control and regulations enhance the transmission of green finance to sustainable results as institutional factors. Results indicate that 1% growth in green bonds reduces the responsible consumption and production pressure (RCPP) index by 0.164 percent implying that green financial growth has been converted into real eco-friendly consumption and production practices. Although material pressure grows in the short run due to economic growth but R&D investment reduces material intensity in the long-run. Originality/value To the best of the author's knowledge, the study is one of the few empirical ones that develops an RCP pressure index. The research presents empirical evidence on how green finance, institutional quality and macroeconomic conditions interact to influence the resultant responsible production and consumption.