In recent times, policymakers and scholars have directed their attention toward the notion of sustainability and green finance, coinciding with the growing global emphasis on environmental protection, climate change mitigation, and sustainable development. The integration of sustainability and green finance practices has emerged as a crucial strategy to address climate change, advance sustainable development goals issues, and build a resilient global economy in the face of pressing environmental challenges. The adoption of green finance and sustainability practices is no longer limited to developed economies. Many developing and under-developed countries are also taking a proactive approach to develop and implement a roadmap and framework for incorporating sustainability. In this chapter, the authors explore the notion of green finance, its crucial role in advancing sustainability, and the substantial consequences it can bring about for diverse businesses and stakeholders.
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The rising global focus on addressing climate change has led to heightened attention toward green finance (GF) in recent literature (Khan et al., 2022; Tariq & Hassan, 2023). The endorsement of the Paris Climate Agreement and the adoption of Sustainable Development Goals by international organizations and national governments respectively demonstrate a stronger dedication to environmental sustainability. Within this framework, it is essential not to disregard the efforts made by the Asian Development Bank (ADB), which actively participates in diverse initiatives aimed at fostering environmentally sustainable development throughout Asia and the Pacific area. One such initiative is climate change funding, a collaborative effort between the Asian Development Bank (ADB) and the Global Environment Facility (GEF). In this context, climate mitigation funding plays a vital role in the framework as it encompasses investment processes aimed at distributing funds to foster environmental sustainability in the region. According to UNEP, for a seamless transition toward sustainability, it is imperative to augment investments in renewable energy sources. In research focused on policymaking, the concept of sustainability has gained significant prominence as a guiding principle for desired outcomes. The Brundtland Report published in 1987 played a pivotal role in shaping this understanding and served as a primary source of inspiration (Commission on Environment, 1987). Consequently, green finance has emerged, emphasizing efficient allocation of resources, environmental sustainability, and prudent investments aimed at mitigating climate and investment risks. Green finance expands upon the concept of sustainability by incorporating environmental, social, and governance (ESG) concerns and risks (Naeem et al., 2022). Its primary objective is to promote investments in sustainable initiatives, thereby furthering the goals of sustainability (Green and Sustainable Finance, 2022).
However, in contrast to conventional financial practices, green finance prioritizes environmental sustainability by placing a strong emphasis on resource efficiency (Kumar et al., 2021). (Zhang et al., 2019) mentioned, the concept of GF is still evolving, leading to a lack of consensus among scholars regarding its precise definition. Further (Klein et al., 2019) mentioned, that green finance refers to the financial support provided for investments that yield positive environmental outcomes. The G20 defines GF as encompassing various financial instruments like green bonds, along with agreements, mechanisms, and environmentally friendly operational practices. It also involves disclosing these agreements to reduce carbon emissions, foster the development of climate-resilient infrastructure, and promote environmentally sustainable practices (Liu & Wu, 2023). However, different opinions exist among researchers regarding the potential outcomes of pursuing the green path for recovery. While some argue that embracing the green path aligns with the goals of sustainability, resilience, and immediate action, emphasizing the financial services sector's ability to drive the necessary change, others contend that following the green path may result in a recovery that is less sustainable, resilient, and urgent (Crona et al., 2021; Navickas et al., 2021). Therefore, a thorough examination of the literature is crucial to attain a well-rounded perspective and grasp the true economic implications of green finance. By undertaking a thorough review, one can achieve an equitable understanding of GF and its tangible influence on the organizations and economy. The existing literature broadly concurs that GF is allied with environmentally favorable results, including the reduction of carbon emissions and increased energy savings. Multiple studies and scholarly sources support the notion that financial investments directed toward green initiatives yield positive environmental outcomes (Crona et al., 2021; Klein et al., 2019; Liu & Wu, 2023; Zhang et al., 2019). In this chapter, we begin by presenting contextual information on sustainability and green financial instruments, including green bonds and green debt, while also exploring the motivations behind GF. Furthermore, we delve into an examination of the existing literature concerning sustainability disclosure, summarizing its trajectory, catalysts, and significance.