1.1. History of ‘green finance’ concept
The origins of green finance can be linked to the broader environmental movement that gained momentum in the 1970s. This period saw the development of increased awareness of environmental issues such as the first Earth Day in 1970 or the establishment of environmental regulatory agencies like the U.S. Environmental Protection Agency (EPA). In academia, the initial concept of sustainable development was introduced in 1972 and was well embraced as a vision recognizing the interconnectedness of social, economic, and environmental issues. Then, the concept of “sustainable development” was developed and popularized by the Brundtland, formally titled “Our Common Future”, by the World Commission on Environment and Development, which emphasized the integration of economic development with environmental sustainability (Brundtland et al., 1987).
During the 1980s and 1990s, the idea that financial markets could be leveraged to promote environmental sustainability began to take shape. One of the earliest forms of green finance was the issuance of green bonds, which are designated for funding environmentally friendly projects. The first green bond was issued by the European Investment Bank in 2007, although similar concepts had been in use for several years prior (Flaherty, Gevorkyan, Radpour, & Semmler, 2017).
The 2000s marked a period of significant growth and institutionalization for green finance. The Kyoto Protocol, which came into effect in 2005, introduced mechanisms like the Clean Development Mechanism (CDM), which allowed for the creation of carbon credits. These mechanisms created new financial incentives for investing in green projects, particularly in developing countries (Nations, 1998). In the academic, research began to increasingly focus on the relationship between financial markets and environmental sustainability. For example, Scholtens (2006) explored how banks could contribute to sustainable development, while Richardson (2002) examined the legal and policy frameworks needed to support green finance.
The last decade has seen a rapid expansion and diversification of green finance. The Paris Agreement in 2015 gave a new impetus to climate finance, as countries committed to mobilizing finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development. For example, green bonds continued to grow in popularity, with global green bond issuances reaching new highs each year. Alongside traditional green bonds, new financial instruments like green loans and sustainability-linked bonds have emerged. These instruments tie the financial terms of the bond or loan to the achievement of specific sustainability targets.
In the academic world, research has become more nuanced and interdisciplinary. Previous studies like D. Zhang, Mohsin, and Taghizadeh-Hesary (2022) shows that “Overall, the findings show that green finance negatively influences carbon emissions in the G-20 countries” and this can be achieved by “the stability and continuity of green finance” and the development of green finance across the entire industrial chain. Specifically, the policies that need to be coordinated and implemented include: (1) creating the emissions trading scheme by continuing to include carbon emission permits in pledged mortgages to provide a greater guarantee rate within the threat range; (2) A bond rating system and green security tailored to each nations’ unique circumstances should be implemented; (3) Increasing the green credit provision for renewable energy projects introduces new measures, such as low-interest loans, easing financing approvals, and shortening the approval cycle; (4) The functions of the securities market must be clarified; and (5) Relaxing the application of green finance in the carbon market.
Despite its growth, green finance faces several challenges. One key issue is the lack of standardized definitions and metrics for what constitutes “green” or “sustainable” investment, leading to concerns about “greenwashing” – where investments are labeled as green without making substantial environmental contributions. Efforts like the EU Taxonomy for Sustainable Activities aim to address this by providing a classification system for environmentally sustainable economic activities.
Looking ahead, the future of green finance is likely to be shaped by ongoing developments in policy, technology, and market dynamics. The integration of digital technologies like blockchain and artificial intelligence in green finance could enhance transparency and efficiency. Furthermore, the increasing focus on ‘just transition’ finance, which seeks to ensure that the transition to a low-carbon economy is fair and inclusive, is likely to gain more attention.
To sum up, green finance has evolved from a niche concept to a key component of the global financial system. Its development reflects a growing recognition of the critical role that finance plays in addressing environmental challenges. As the world continues to grapple with issues like climate change and resource depletion, the importance of green finance in driving sustainable economic growth is likely to increase further.
In this study, with the target of evaluating the role of green finance in higher education, we introduce the concept of green finance to the respondents with all its instruments and mainly focus on the impact of green finance on environment.
