Research Information System
in: Sustainable Finance, Springer Nature, pp.29-40, 2026
Green finance is increasingly promoted as a tool to advance environmental sustainability, but its effectiveness under social inequality remains underexplored. This chapter examines whether income inequality moderates the relationship between green finance and sustainability outcomes across 24 developed and developing countries from 2015 to 2022. Using a fixed effects model with Driscoll-Kraay standard errors, the analysis reveals three key findings: (i) green finance has a positive and statistically significant effect on sustainability performance; (ii) income inequality is negatively associated with sustainability; and (iii) most critically, income inequality not only weakens but reverses the positive impact of green finance, transforming its effect on sustainability into a net negative. This suggests that green finance may deepen disparities in unequal societies and reduce environmental performance, undermining its intended role as a catalyst for sustainable development. The findings challenge the assumption that green financial instruments are universally beneficial and underscore the need for policy frameworks that integrate equity goals. Without addressing structural inequalities, green finance risks reinforcing exclusionary outcomes. The chapter concludes that aligning green finance with redistributive reforms is essential to achieving inclusive and resilient ecological transitions.