Female political empowerment and green finance

Abstract

Using a large sample of 47 countries from 2007 to 2022, we provide evidence that female political empowerment (FPE) is a critical determinant of green finance (green bonds). Our results remain robust when addressing concerns of cross-sectional dependence, omitted variable bias, alternative definitions, and various alternative specifications. We explore three key economic mechanisms underlying our findings: firstly, FPE positively influences the prevalence of environmental regulations; secondly, it increases the stringency of environmental policies; and finally, it imposes a higher financial burden on businesses for environmental misconduct through tax collection. Our findings are significantly stronger in countries with higher levels of climate change exposure to the economy and human life, as well as in countries with higher levels of carbon emission and better-developed credit markets. However, the long-run impact is only significant in sample countries where females does not hold the top position in the government. Overall, our results provide important insights into how female political influence can yield positive outcomes in addressing financial challenges to environmental sustainability.