When Does Green Finance Promote Inclusive Green Growth? New Evidence from Developing Countries

Despite growing international commitments to green finance, it remains an open empirical question whether such transfers translate into inclusive green growth (IGG) in developing countries. This study addresses this gap by examining how countries’ levels of development and executive corruption condition the effects of green finance on IGG. To this end, we draw on a comprehensive sample of 99 developing countries spanning 2000–2024 and employ instrumental-variable and quantile regression techniques for the analysis. Three clear findings emerge. First, we find robust evidence that green finance promotes IGG, but only in low-income countries. Second, we show that executive corruption significantly reduces the IGG-enhancing effects of green finance in low-income countries, whereas no comparable effect is observed in higher-income developing countries. Third, the evidence reveals notable heterogeneity in the conditional distribution of IGG, with countries at the lower end of IGG performance experiencing relatively larger gains from green finance. Overall, the findings indicate that the effectiveness of green finance in promoting inclusive green growth depends critically on countries' levels of development and the prevalence of executive corruption.