Abstract

Main objective of research proposal is to identify the nexus among different concepts within the
study of green finance. For this purpose, an in-depth analysis and review of impact of green
finance on environmental, social and governance framework (ESG) in relation to green washing
perspective will be studied. Similarly, impact of green finance on environmental and social
responsibility (ESR) will also be investigated. Lastly, impact of green finance policy on firms’
carbon foot print will also be investigated broadly. Population of research study will be firms of
developing economies. Three Essay approach is being used to examine the nexus of various
concepts of green finance policies and procedures. Hence, various econometric and statistical
tools will be applied on collected date to analyze an in depth review of connection among
dependent and independent variables. Each of the essay will use different research methods and
techniques that could justify the phenomenon of green finance concepts. The present
investigation will include primary and secondary data collection methods followed by qualitative
and quantitative research techniques. This study will help explain policy makers, academic
researchers and practitioners to understand and analyze the nexus within field of green finance.

Key words : Green finance, Green washing, Environmental, social and governance (ESG)
disclosures, Environmental and Social Responsibility (ESR), Carbon emissions.

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Table of contents
Abstract......................................................................................................................................................1
1.Introduction............................................................................................................................................4
1.1 Research questions/Research objectives of study..........................................................................5
1.2 Research Problem............................................................................................................................5
1.3 Research Objective..........................................................................................................................5
Essay1.........................................................................................................................................................6
1.1 Introduction.....................................................................................................................................6
1.2 Theoretical and Empirical Literature Review...............................................................................6
1.3.Research questions/Research objectives of essay..........................................................................9
1.4.Rational/Significance.......................................................................................................................9
1.5.Hypothesis Development...............................................................................................................10
1.6.Research Design.............................................................................................................................10
1.7.Sampling Design............................................................................................................................10
1.8 Peer relative greenwashing score..................................................................................................11
1.9.Model Specification.......................................................................................................................11
Essay 2......................................................................................................................................................12
2.1.Introduction...................................................................................................................................12
2.2.Theoretical and Empirical Literature Review.............................................................................12
2.3.Research questions/Research objectives of essay........................................................................13
2.4.Rational/Significance.....................................................................................................................14
2.5.Hypothesis Development...............................................................................................................14
2.6.Model Specification.......................................................................................................................14
Essay 3......................................................................................................................................................15
3.1.Introduction...................................................................................................................................15
3.2.Theoretical and Empirical Literature Review.............................................................................15
3.3.Research questions/Research objectives of essay........................................................................16
3.4.Rational/Significance.....................................................................................................................16
3.5.Hypothesis Development...............................................................................................................17
3.6.Model Specification.......................................................................................................................17
References................................................................................................................................................18
7-List of Figures.......................................................................................................................................23
Figure 7-1: ESG Frame work.............................................................................................................23

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Figure 7.2.United Nations Sustainable goals......................................................................................24

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1.Introduction
An ongoing climate and environmental changes are quickening the pace of sustainability and
inclined towards zero pollution green economy. The term green finance refers to the process of
intensified level of financial activities which includes (but not limited to) banking services,
microfinancing , insurance services and investment activities to achieve the objective of
sustainability through supporting public , private and charitable organizations .Last decennary
has witnessed unprecedent sustained climate and environmental movements and which have
made aware that to achieve the goal of no pollution economy, carrying out green financing
activities are insensible to achieve such objective. In an ongoing effort to strengthen the green
financing activities and to meet the challenge of climate change, recently held United Nation
conference in Dubai, United Arab Emirates (COP 2024) has shown strong desire to fight global
climate change and members of COP24 are required to design set of policies and procedures in
order to do so. Green washing is the process of passing on inaccurate signal and information that
an organization is working towards efforts and contribution for positive climate change and
offering products and services which are ecofriendly.

Environmental, Social and Governance (ESG) frameworks are set of strategies that assist
investors to recognize the risks and opportunities. Environmental issues include climate change,
pollution, water purification system and air quality. Social accepts covers better workplace
security, community engagements and employee’s rights. Likewise, governance aspect includes
ethical policies and procedures and board composition. Figure 1.2 defines analytical aspect of
ESG framework.on border terms, The term ESG refers to Environmental, Social and Governance
are set of values and standards which determines the sum of business’s influences on society , the
environment and the degree of responsibility in relations with transparency and accountability.

Lupu & Criste (2022) had abridged the challenges, risk and opportunities for green financing
sector as a whole. Categorically, this was identified that role of human activities are much higher
as compared to natural causes in letting the natural climate changes.

In a report, published by Judge (2023) has emphasized on the recently developed standards to
knock out the impact of green washing. Rules are designed as per the standards set out by G-20
task force and which are based on procedures of climate disclosures. These rules and procedures

4
are welcomed by various economies around the globe and signaled them as “global baseline
standards for the ongoing climate shocks”

1.1 Research questions/Research objectives of study

Main emphasis of this dissertation is to address the following questions;

1-What is the impact of Green finance on environmental, social, and governance (ESG)
performance; green washing perspective

2- What is the impact of green finance on environmental and social responsibility (ESR)

3- What is the impact of green finance policy on firm’s carbon footprint

1.2 Research Problem

Numerous research work have been conducted on the development of green financing and its
impact on overall climate change structure. However, with the evolving themes of
environmental, social, and governance (ESG) performance and its correlation with green
washing perspective still requires attention. Similarly, impact of green finance on environmental
and social responsibility (ESR) with evolving trends are gaining attention and the present study
will address the issue. Present study will also enhance the existing knowledge of green finance
on firm’s carbon footprint. Hence , present study would pave the way to address all such area of
research.

1.3 Research Objective

Main objective of the research work is to determine the impact of green financing on
environmental, social, and governance (ESG) performance and which will be evaluated thorough
the perspective of green washing perspective. Similarly, an in depth impact of green finance on
environmental and social responsibility (ESR) will also be analyzed. Correspondingly, impact of
green finance policy on firms ’carbon footprint will also be tested.

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Essay1

Impact of Green finance on Environmental, Social, and governance (ESG)

performance; Green Washing perspective

1.1 Introduction
Last decade has witnessed constant climate shift and ecological movements and which has
convinced the world to make efforts and to quicken the evolution of sustainable development in
order to transform the society in to zero pollution green economy. At the present time,
sustainability is considered as essential perception of environmental disclosures. Investors are
being urged to implement environmental, social and governance (ESG) factors in to their
investment decisions. According to Seele & Shultz (2022), organizations are fully aware that for
survival and to achieve competitiveness level, environmental risk is one of the elements to cater
on. Hence, in order to gain value creations and to address environmental risks, risk mitigations
strategies are need of time. Lee & Raschke (2023) had predicted that recent events i.e. the
pandemic, economic financial disaster and wars urged the researches to examine and conduct in
depth analysis to create economic and social norms.

1.2 Theoretical and Empirical Literature Review

Lyon et al (2013), Marquis et al (2016) and Yu et al (2018) had concluded that firm’s valuation
and risk management practices are significant concepts with relation to environmental, social and
governance factors (ESG). Several studies have intensively raised corporate social responsibility
(CSR) significance and its disclosures. Previous literature has played significantly correlated the
concept of environmental, social and governance (ESG) disclosure on firm valuation, but green
washing is considered as risk to precise ESG disclosures. Bowen & Aragon-Correa (2014) and
Du (2014) had recommended that greenwashing may be deliberate and misleading disclosure
introduced by organizations and which is profitable for organization , however it has negative
impact on overall society.

Yu, Luu, & Chen (2020) had investigated and assumed that firm’s ESG conduct can be prevented
through in depth analysis and inspection of independent directors, letting the business go
transverse, public awareness in a less corrupted country system and firms’ investors. By

6
implementing the strategy of two firm level governance is effective in gaining the motive and
diminishing the impact of deceptive greenwashing disclosures. Bosco & Misani (2016) had
proposed that firm’s cross listing significantly recovers corporate social responsibility , but there
are no positive signs in the case of corporate governance level. It was also emphasized that
impact of transverse behavior of firms plays pivotal role in the case of investor protection rules.
On the contrary, impactful regimes resembles with bad CSR presentation and depict the notion
that they confine at managerial process. In a recent publication on the role of ESG scoring and
green washing risk in explaining the yield of green bonds, Baldi & Pandimiglio (2022) had
investigated the aspects that mostly contributes the returns of public segment and corporate green
pledges in addition to those explained by conventual finance theory. Hence, finding validates the
results of theorical explanations that investors are motivated to receive lesser returns with
respect to investing of infrastructure developments in order to achieve sustainability targets. It
was also concluded that greenwashing behavior was observed largely in manufacturing sectors,
with more pronounced in finance industry.

Zhang (2024) had investigated and established a principal agent approach model to examine the
effects of green investment decisions and its actual results. The investigation has brought out
significant findings that comment based investment strategies marks lower level of carbon
reduction as compared to outcome bases strategies. In addition to the effectiveness of
commitment based strategies, accuracy and verification and its connected cost also plays major
role to implement overall societal benefits. In one of other research publication, Liu et al (2024),
examined the effect of environmental, social and governance (ESG) report greenwashing on
stock price. Results discovered that ESG report brought out increase in stoke price and the results
were consistent with high earning company performances. This was also discovered
overwhelming and motivated internal and external corporate governance can significantly limit
the impact of ESG greenwashing. Hence, results had also strengthen the principle of asymmetric
information and which proved increase in high stock price. In a recent article, Hu et al (2024)
had performed empirical analysis to gauge the relationship among firm’s green washing behavior
and ESG disclosures and determined that if the firms ESG disclosures are clearer and more
readable, they are less likely to exhibit greenwashing behavior. Due to rise in asymmetric
information level, such negative relationship was identified.

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Tohang, Martowidjojo, & Pirzada (2024) have analyzed suspectable pattern of green washing in
relation to business phenomenon of ESG and observed the unfavorable impact of earning quality
and which is geared by risk of uncertainty and operational framework with the organization.
According to Hermanis (2023), rising pattern of customer choices for sustainable products and
services especially in the period of ESG investing, it is significant to differentiate and recognize
sincere efforts for ESG principles. In this regard, text mining analysis will eventually aid to
recognize sustainable business practices on business financial performance.

Breuer, Hass, Knetsch, & Seefried (2014) had accredited that rise of ESG has contributed the
wide spread phenomenon and that plays significant part of rising economic conduct and
improves environmental safety, however, there are still need of massive steps to be taken out
related to ESG disclosures.

This Paper will demonstrate three different types of greenwashing concept. One of the types of
greenwashing disclosure is identified as manipulative disclosure. Lyon & Maxwell (2011), Lyon
et al (2013) and Marquis et al (2016) had studied that organizations exaggerate their
sustainability and environmental performance and named it as green washing strategy. By
assuming the greenwashing strategy, organizations published environmental statistics and simply
deceive their stakeholders. Kim & Lyon (2014) had proposed that if the organizations adopt
brown washing technique to convey their environmental performance and which may have
damping effect on the share price of organization. One of the other types of greenwashing
technique assumes selective disclosures and which deceive shareholders. Lyon & Maxwell
(2011), Lyon et al (2013) and Marquis et al (2016) had clarified greenwashing organizations
purposefully takes selective and optimistic environmental information’s and hides pessimistic
information. Kirk & Vincent (2014) standardized the organizations techniques how they release
private and sensitive date about environmental sustainability to selective category of
shareholders. Likewise Delmas et al (2009), Majid et al (2013) , Testa et al (2015) and Cho et al
(2018) had examined third level of green washing and proposed that it is inclined more towards
product level green washing as compared to firm level greenwashing. Delmas et al (2009) had
stated that to achieve objective of maximization of sale, organizations can exaggerate the
economical values of products.

8
In a working paper series conducted by Asian development bank and which was researched by
Kapoor et al (2020), established that issuing green bonds in ASEAN countries are effective
source of funding in gaining sustainable goals and green financing growth in the region. In order
to achieve this, awareness of issuing of green bond mechanism in prompting the investing tool in
green buildings and supporting local currency with the help of resident investors are the key
criteria to do so. Yu et al (2020) had investigated that in light of environmental , social and
governance (ESG) framework, organizations can be prevented from green washing conduct
through independent auditors, dominant public interest , cross listing mechanism and by
institutional investors. Therefore, ESG mechanism helps to deceive disclosures and it is
considered as the most effective one. In a report, published by Judge (2023) has emphasized on
the recently developed standards to knock out the impact of green washing. Rules are designed
as per the standards set out by G-20 task force and which are based on procedures of climate
disclosures. These rules and procedures are welcomed by various economies around the globe
and signaled them as “global baseline standards for the ongoing climate shocks”

1.3.Research questions/Research objectives of essay

Main emphasis of this essay is to address the following questions;

1-What is the impact of Green finance on environmental, social, and governance (ESG)
performance; green washing perspective

1.4.Rational/Significance
The evidence of relationship between ESG disclosures with respect to green washing , on
environmental and social responsibility (ESR) and in relation to organizations carbon footprint is
largely unexplored around the globe. Majority of the past research work and publications focused
on China and on some developed countries. However, the nexus needs to be discounted in
emerging economies. Such exploration in emerging economies will pave the way for policy
makers and regulators to understand the significance of green finance policies and procedures
and which will facilitate flexible implementation of green finance principles. Present study will
investigate the impact of Green finance on environmental, social, and governance (ESG)
performance; green washing perspective and which will be beneficial for value creation. It will
also provide an insight on developing economies and how the ESG disclosures can effective and
robust fully may contribute the value creation and benefit for the organizations.

9
1.5.Hypothesis Development
Based on the above literature review and explanation of theoretical choices, following
hypotheses are being generated

Hypothesis 1

Firms green washing practices are directly linked with the increase ownership of firm’s
investors.

Hypothesis 2

Firm green washing practices are directly inked with the increased board size of organizations.

Hypothesis 3

Low corruption in a country in positive correlated with the less greenwashing conduct.

Hypothesis 4

Policitcal stability and rights are positively correlated with less green washing conduct in the
country.

Hypothesis 5

Issuance of green bonds is positively associated with the diminishing impact of green washing
behavior

1.6.Research Design
After hypothesis development phase ,research design model will be explained here. First of all,
peer relative greenwashing scores will be created , after which the model of various firms’
aspects will be tested. . For this purpose, it is proposed that last 25 years data of firms will be
selected of developing economies. Nature of the research work will be quantitative and
numerous statistical tools and techniques will be applied on the collected data to check the
validated of results.

1.7.Sampling Design
Population of this research investigation will be firms of developing economies

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1.8 Peer relative greenwashing score
Peer relative scores can be used to calculated through magnitude of organizations greenwashing
conduct.

A firm’s peer-relative greenwashing score = (a normalized measure representing a firm’s relative

position to its peers in the distribution of the Bloomberg ESG disclosure score) - (a normalized
measure representing a firm’s relative position to its peers

Tamimi & Sebastianelli (2017) and Yu et al (2018) used the Bloomberg ESG disclosure scores
in order to calculate the Firms ESG disclosures. The Bloomberg ESG disclosure score provides
the amount of ESG data and which a firm discloses to the public but does not measure its ESG
performance.

1.9.Model Specification
The regression model assumed the following equation

(Greenwashing scores)i,k,t = αi + β 1 ¿ )i,t + β 2 ¿ )i.t + β 3 ( corruption index ) i,t +

β 4 ( political stability )i,t + β 5 (Issuance of greenbonds )i,t

Where Green washing scores for any company i of country k in year t and which will measure
magnitude of firms green washing behavior in ESG dimension.

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Essay 2
Impact of green finance on environmental and social responsibility (ESR)

2.1.Introduction
In the present social and competitive environment, sustainability provides the underpinning
factor to organizations to grow tactically innovative and ethically within lively developing
universal landscape. In order to play an essential role in developing sustainable practices within
organizations, green financing, green technology and green investment are the dynamic factors to
do so Wang et al (2023), Wang & Yan (2023), Wang et al (2022) and Xu et al (2020). According
to (Ye & Dela, 2023), green investment aids as profitable tool for business and organization to
accept sustainable business practices and which increases operational efficiency of businesses.
Bernal-Conesa et al (2017) had provided justification that green technology plays significant role
in achieving environmental sustainability and through utilization of funds. If organizations are
investing and paying more attention towards green technology, green finance and green
investment in relation to corporate social responsibility (CSR), then they achieve the highest
level of sustainability and which ultimately provides them chance to become competitive in the
industry.

2.2.Theoretical and Empirical Literature Review

Stieb (2009) had theoretically provided the evidence that shareholders tend to achieve
environmental and social responsibility objective through maximation of shareholders wealth, in
other words, their focus is more towards shareholder centric approach. Schaltegger et al (2017)
has theoretically studied the imperious practices of sustainable environmental and stated
organizations management and stakeholders together decision making power provides to achieve
the goals of environmental and social responsibility (ESR). Schaltegger et al (2017) has also
studied that combination of stakeholders and agency theories provides strengthened the concept
of robust governance structure and which ultimately provide a way to achieve sustainable
businesses practice with the usage of finance, investment and green technology.

Empirically, numerous research work has been carried out to explore the dynamic aspects of
green finance, green technology , green investment , environmental and social responsibility and
concept of corporate governance to achieve the objective of productive sustainability. Wang et al

12
(2022) has studied that more reactive forces to achieve organization sustainability are corporate
governance and steps taken with respect to green financing projects. Pambudi et al (2022) had
identified that with the arbitration feature of environmental and social responsibility (ESR),
associateship between green financing and sustainability development goals were positive and
statically significant. On the contrary, Jain et al (2023) had washed out the reflection of green
investment and technology and found statistically significant relationship between green finance
and corporate social responsibility. Chandrakant & Rajesh (2023) had also investigated positive
association between corporate governance and sustainability.

Liu et al (2023) had used Data envelopment approach (DEA) to find the impact of green
economic growth. For this purpose, data from 2008 till 2018 was collected and sample of 30
provinces of China were selected. In order to find the empirical relationship, two way fixed
effect model (FEM) and Difference in Difference (DID) models were applied on the data set.
This was concluded that sound policies and procedures can supports the notion of green finance
and economic development.

Wang & Wang (2021) had selected data from 2008 till 2020 to find the relationship of green
finance on the upgrading of China's regional industrial structure from the perspective of
sustainable development. Generalized Method od Means (GMM) technique was employed on
data set. Therefore, Green Technology innovation, improving foreign exchange and
implementing green finance structure are the vital tool to increase the level of green financing.

Mudalige (2023) had quantified emerging trends and techniques in the area of green financing.
For this purpose, an in-depth analysis of bibliometric approach was exercised on 978
publications and which were issued in between 2011 till 2023. In addition to sorting out many
other theses, notable were green finance and innovation, green finance and corporate social
responsibility and green finance and economy.

2.3.Research questions/Research objectives of essay

Main emphasis of this essay is to address the following questions;

2- What is the impact of green finance on environmental and social responsibility (ESR)

13
2.4.Rational/Significance
The evidence of relationship between green financing with respect to environmental and social
responsibility is largely unexplored. Majority of the past research work and publications focused
on China and on some developed countries. However, the nexus needs to be discounted in
emerging economies. Such exploration in emerging economies will pave the way for policy
makers and regulators to understand the significance of green finance policies and procedures
and which will facilitate flexible implementation on environmental and social responsibility.
Present study will investigate the impact of Green finance on environmental and social
responsivity and which will be beneficial for value creation. It will also provide an insight on
developing economies and how the environmental and social responsibility can effectively and
robust fully may contribute the value creation and benefit for the organizations.

2.5.Hypothesis Development.
Hypothesis 1

Green technology plays significant role in enhancing environmental and social responsibility
(ESR)

Hypothesis 2

Renewable energy investment plays significant role in enhancing environmental and social
responsibility (ESR)

Hypothesis 3

Issuance of green bonds plays significant role in enhancing environmental and social
responsibility (ESR)

2.6.Model Specification
The regression model assumed the following equation

(ESR)i,k,t = αi + β 1 ¿ )i, + β 2 ¿ )i.t + β 3 ( Issuance of greenbonds )i,t

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Essay 3
What is the impact of green finance policy on firm’s carbon footprint

3.1.Introduction
With the increased expansion of worldwide industrialization, sever climate issues have become
risk due to fossil energy consumptions and which have regularly exposed the sustainable
expansion of society. Natural purification system of earth is in an ongoing risk of carbon dioxide
releases. Meo & Karim (2022) had studied the association among carbon dioxide and green
finance in the development economies. Consequently, effect of green finance on carbon releases
was found to be negative among each other. It was also predicted that global warming will be
key perimeter for economies as financial sector is continuously overlooking the ecology system.
Abbasi et al (2021) had studied the effect of carbon emissions and suggested that clear and
comprehensive policies are the need of time for economies to lessen the effect of carbon
emissions. According to one of report published by UNEP (2015) and per figure 1,2, United
Nation is continuously working with world economies and to their regulator to bring into line
financial system which may aid to achieve United Nations Sustainable goals 2030. Berensmann
& Lindenberg (2019) had provided rational of introducing modern financial instruments such as
green investment, green bond, carbon swap markets, developments in fin tech in order to meet
sustainable goals. Li & Jia (2017) had concluded that in order to diminish the impact of
environmental degradation, providing ecofriendly finances and investments are the most
impactful tool to do so.

3.2.Theoretical and Empirical Literature Review

Numerous theoretical and empirical literature have been published which correlate the linkage
between green finance and firms carbon foot print and hence cannot be overstated. Li et al
(2017) had predicted that in order to reduce the carbon emission, green finance policies and
procedures plays pivotal role with relation to intensive industry practices. For this purpose
model was used to predict the results. Some of other notable work on linkage of carbon emission
with relation to economic growth by Xu & Song (2011), financial development by Katircioğlu &
Taşpinar (2017) and technological innovation by Sun et al (2020).

15
Theoretically, Jiang et al (2024) had provided rational that growth of green finance can lessen
carbon emission effectively and which can be constantly remain until longitudinal impact.

Sadiq et al (2022) had discovered long term relationship among various variables in South Asia
and stated that green economic variable, greenhouse gas emission, research & development
expenditures and renewable energy invention plays pivotal role in reducing carbon emission.
Another research work conducted by Irfan et al (2022) explored the extensive part of green
finance in encouraging innovation and acknowledged research and development investment as
the main spread network.

Rentschler & Bazilian (2017) had illustrated and sublimed the significant stand for designing
key fossil fuel subsidy transformations. This motive can be achieved through implementing
policies and procedures which aids public cooperation and social protection of exposed
population clusters. Hence, long term sustainable goals can be achieved through allocating
justifiable revenue resources.

Research work carried out by Khan et al (2022) had established relationship between green
financing and environmental sustainability. Panel data analysis was employed on selected
regions. This was concluded that if the energy production is being generated from renewable
sources, this decreases CO2 emission. Hence, in order to reduce the impact of CO2 emission,
trade pattern among economies pertaining to renewable energy sources should take place.

Research work conducted by Zhang (2022) had established the behavior and movements of
green financial system through using difference in difference approach. For this purpose, firm
level data from 2013 to 2019 was taken. This was identified that if the green financial regulations
are implemented in its true spirit, then highly polluted firms becomes less population if such
firms belongs to the category private sector.

3.3.Research questions/Research objectives of essay

Main emphasis of this essay is to address the following questions;

3-What is the impact of green finance policy on firm’s carbon footprint

16
3.4.Rational/Significance
Although some of the previous studies has examined evidence of relationship between green
financing with respect to carbon emission, however majority of the past research work and
publications focused on China and on some developed countries. However, the nexus needs to be
discounted in emerging economies. Such exploration in emerging economies will pave the way
for policy makers and regulators to understand the significance of green finance policies and
procedures and which will facilitate flexible implementation on carbon food print. Present study
will investigate the impact of Green finance on carbon emission and which will be beneficial for
value creation. It will also provide an insight on developing economies and how the reduction of
carbon emission can effectively and robust fully may contribute the value creation and benefit
for the organizations.

3.5.Hypothesis Development
Hypothesis 1

Green finance can increase innovation capabilities which results in improved carbon emission
efficiency.

Hypothesis 2

Green finance has the impact on the level of technological innovation to reduce carbon
emissions.

Hypothesis 3

There is direct association between green finance in reducing carbon dioxide emission

3.6.Model Specification
The regression model assumed the following equation

(Caron emission)i,k,t = αi + β 1 ¿ )i, + β 2 ¿ )i.t + β 3 (Green finance)i,t

17
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7-List of Figures
Figure 7-1: ESG Frame work

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Figure 7.2.United Nations Sustainable goals

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