Do green finance shocks reduce emissions? Nonlinear evidence from BRICS countries

Abstract

This research aims to investigate the intricate relationships among key economic variables within the BRICS (Brazil, Russia, India, China, and South Africa) economies during the period 1992–2022. The study scrutinizes the interplay between green finance (GF), non-renewable energy (NRE) consumption, foreign direct investment (FDI), gross domestic product (GDP), and carbon dioxide (CO
2
) emissions. The analysis leverages the symmetric and asymmetric autoregressive distributed lags (ARDL) and nonlinear ARDL estimation methodologies to probe both short-term and long-term associations among these variables. Notably, green finance exhibits a discernible negative and asymmetric correlation with CO
2
emissions. This observation signifies that the adoption and implementation of green financial practices contribute substantively to the mitigation of carbon emissions, thereby aligning with environmental conservation objectives. In contrast, FDI, NRE consumption, and GDP display a positive nexus with CO
2
emissions. This positive linkage underscores the concomitant rise in pollution levels with increased FDI inflows, higher NRE usage, and economic growth. In light of these empirical insights, this study underscores the pressing significance for the BRICS economies to accord paramount priority to green financing initiatives.