Background and Context
Research Focus
This study examines what drives governments and central banks to adopt green finance policies, which are climate policies targeting financial actors like banks and investors.
Data and Scope
The research analyzes 383 green finance policies from 188 countries between 2000-2019 using survival analysis methodology to identify key drivers.
Theoretical Framework
The study combines market-based drivers (financial stability concerns, green finance markets) with institutional factors (fossil fuel subsidies, social pressure) to explain policy adoption.
Theoretical Framework: Market-Based and Institutional Drivers Shape Green Finance Policies
- Study examines both market-based drivers and institutional factors that influence green finance policy adoption.
- Market factors include exposure to fossil fuel financing and development of green bond markets.
- Institutional factors encompass government fossil fuel subsidies and social pressure from divestment campaigns.
Accelerating Adoption: Green Finance Policies Surge After 2015 Paris Agreement
- Green finance policies show exponential growth, with 383 policies adopted by 75 countries by 2019.
- Sharp acceleration after 2015 reflects impact of Paris Agreement on global climate policy priorities.
- Early adoption concentrated in OECD countries, then spread to emerging economies worldwide.
Fossil Fuel Financing Exposure Emerges as Primary Driver of Policy Adoption
- Fossil fuel financing shows strongest positive effect, increasing policy adoption likelihood by 12 percent.
- Green bond market development also positively influences adoption, though effect is smaller.
- Traditional institutional factors like subsidies and divestment show weaker or mixed effects overall.
Climate Awareness Shapes Policy Drivers: Different Factors Matter in Different Countries
- In countries with high and medium climate awareness, fossil fuel financing drives policy adoption.
- In low climate awareness countries, government fossil fuel subsidies become the primary driver.
- This suggests different policy pathways depending on domestic climate change awareness levels.
Policy Stringency Matters: Divestment Pressure Affects Mandatory and Voluntary Policies Differently
- Divestment campaigns reduce likelihood of mandatory policies but increase voluntary policy adoption slightly.
- Governments appear to prefer less restrictive policy responses when facing social pressure.
- Fossil fuel subsidies also show opposite effects, promoting voluntary over mandatory approaches.
Contribution and Implications
- First comprehensive study identifying what drives countries to adopt green finance policies worldwide.
- Reveals financial industry exposure to fossil fuels creates pressure for regulatory climate action.
- Shows climate awareness levels determine which factors most effectively drive policy adoption.
- Provides evidence that social pressure leads to softer voluntary policies rather than binding regulations.
- Demonstrates how growing green finance markets create demand for supportive regulatory frameworks.
Data Sources
- Visualization 1: Conceptual framework based on literature review and theoretical model (Section 2)
- Visualization 2: Policy adoption trends constructed from study sample description and Figure 2
- Visualization 3: Hazard ratios and statistical significance from baseline regression results (Table 3)
- Visualization 4: Climate awareness effects derived from robustness check analysis (Table 8)
- Visualization 5: Policy type differences based on mandatory vs non-mandatory analysis (Table 4)
Infographics by Topic
