Infrastructure Financing Efficiency through Green Bonds: An ESG Performance Perspective on Emerging Markets
Keywords:
green bonds, ESG performance, infrastructure financing efficiency, emerging markets, sustainable investmentAbstract
The global demand for sustainable infrastructure has intensified in emerging markets as a result of rapid urbanization and industrialization. Financing large-scale infrastructure projects, however, remains a significant challenge, as traditional funding sources often prove insufficient. Green bonds have emerged as a viable instrument to mobilize capital for environmentally sustainable projects. Nevertheless, the impact of green bonds on infrastructure financing efficiency (IFE), particularly in emerging markets characterized by less developed capital markets and inconsistent ESG data, remains inadequately understood. This study addresses this gap by investigating the effects of green bond issuance and ESG performance on IFE across twelve emerging economies from 2015 to 2024. Employing econometric models and mediation analysis, the research demonstrates that ESG performance acts as a mediator in the relationship between green bond issuance and financing efficiency. The analysis reveals that green bonds significantly enhance IFE in China and India, with China experiencing the most pronounced improvements due to its robust regulatory framework, while Brazil's fragmented institutional structure constrains the effectiveness of green bonds. The findings underscore the importance of a strong regulatory environment, consistent ESG disclosures, and institutional coherence in maximizing the benefits of green bonds. This research contributes to the literature by providing empirical evidence and offering practical guidance for policymakers, investors, and development banks seeking to improve infrastructure financing through ESG-aligned financial instruments.
References
1. S. Mahmood, P. Misra, H. Sun, A. Luqman, and A. Papa, "Sustainable infrastructure, energy projects, and economic growth: mediating role of sustainable supply chain management," Annals of operations research, pp. 1-32, 2024. doi: 10.1007/s10479-023-05777-6
2. E. E. Akhigbe, N. S. Egbuhuzor, A. J. Ajayi, and O. O. Agbede, "Designing risk assessment models for large-scale renewable energy investment and financing projects," International Journal of Multidisciplinary Research and Growth Evaluation, vol. 5, no. 1, pp. 1293-1308, 2024. doi: 10.54660/.ijmrge.2024.5.1.1293-1308
3. Y. Hu, and Y. Jin, "Unraveling the influence of green bonds on environmental sustainability and paving the way for sustainable energy projects in green finance," Environmental Science and Pollution Research, vol. 30, no. 52, pp. 113039-113054, 2023. doi: 10.1007/s11356-023-30454-3
4. O. Onabowale, "Energy policy and sustainable finance: Navigating the future of renewable energy and energy markets," World Journal of Advanced Research and Reviews, vol. 25, pp. 2235-2252, 2024.
5. R. Sadhwani, "Green Bonds and ESG Investing: Evaluating Financial Returns and Sustainability Impact in Emerging Markets," AEIDA: Journal of Multidisciplinary Studies, vol. 2, no. 1, pp. 1-12, 2025.
6. M. Khan, and M. T. Majeed, "Financial sector development and energy poverty: empirical evidence from developing countries," Environmental Science and Pollution Research, vol. 30, no. 16, pp. 46107-46119, 2023. doi: 10.1007/s11356-023-25585-6
7. M. Singhania, N. Saini, C. Shri, and S. Bhatia, "Cross-country comparative trend analysis in ESG regulatory framework across developed and developing nations," Management of Environmental Quality: An International Journal, vol. 35, no. 1, pp. 61-100, 2024. doi: 10.1108/meq-02-2023-0056
8. R. Raman, S. Ray, D. Das, and P. Nedungadi, "Innovations and barriers in sustainable and green finance for advancing sustainable development goals," Frontiers in Environmental Science, vol. 12, p. 1513204, 2025. doi: 10.3389/fenvs.2024.1513204
9. I. Otchere, A. Abdulrahman, and J. Wang, "Environmental, social, and governance investing and sustainability of pension funds: Evidence from the organisation for economic cooperation and development countries," Economic Modelling, vol. 143, p. 106948, 2025. doi: 10.1016/j.econmod.2024.106948
10. A. Hamisu, "Role of climate financing in advancing the SDGS: Addressing global challenges through green bonds and carbon markets," International Journal of Accounting Research, vol. 9, no. 2, pp. 65-69, 2024.
11. L. Liu, "Exploring the relationship between green bond pricing and ESG performance: a global analysis," Environment, Development and Sustainability, pp. 1-40, 2024. doi: 10.1007/s10668-024-05843-4
12. M. A. Khalil, S. Khalil, and P. Sinliamthong, "From ratings to resilience: The role and implications of environmental, social, and governance (ESG) performance in corporate solvency," Sustainable Futures, vol. 8, p. 100304, 2024. doi: 10.1016/j.sftr.2024.100304
13. J. Junaedi, "Understanding the role of finance in sustainable development: A qualitative study on environmental, social, and governance (ESG) practices," Golden Ratio of Finance Management, vol. 4, no. 2, pp. 113-130, 2024. doi: 10.52970/grfm.v4i2.422
14. M. Azam, M. Haroon, S. U. Rahman, H. Ali, and M. I. Chani, "The theoretical perspective of green finance," In The palgrave handbook of green finance for sustainable development, 2024, pp. 19-47. doi: 10.1007/978-3-031-65756-6_2
15. T. Awan, and A. Gul, "Impact of environmental, social, and governance (ESG) performance on investment mix," New empirical evidence from non-financial firm in Pakistan. International Research Journal of Management and Social Sciences, vol. 5, no. 1, pp. 880-900, 2024.
