Green finance incentives: An empirical study of the Pakistan banking sector

Abstract

In 21 century the climate change has become an important issues for businesses as well as stockholders. Consequently, to reduce carbon emission financial institutions offer green financing to businesses to mitigate this issue. However, the availability of green loan remains the important case. Therefore this research aims to know how this financing gap can be minimized. A panel design dataset was collected which consists of green financing data for the period 2009 to 2015 from 24 banks operating in Pakistan. We applied Two-stage Least Square Regression Analysis for data analysis. The results revealed that green loans are a less risky investments. Further, the findings also provides useful information to managers who look for grow their business loan and minimize default risk. This study contributes to the existing literature in green financing by filling the gap, particularly for developing countries through empirical evidence. The finding suggests that banks must invest more in green projects.