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Article

Regulating Green Finance and Managing Environmental Risks in the Conditions of Global Uncertainty

by
Elena G. Popkova
1,*,
Tatiana N. Litvinova
2,
Elena Petrenko
3,4 and
Aleksei V. Bogoviz
5
1
Department of Economics, RUDN University, 117198 Moscow, Russia
2
Department of Applied Economics and Management, Volgograd State Agricultural University, 400002 Volgograd, Russia
3
Department of Management, Plekhanov Russian University of Economics, 115093 Moscow, Russia
4
Eurasian Academy, 831 04 Bratislava, Slovakia
5
Independent Researcher, 101000 Moscow, Russia
*
Author to whom correspondence should be addressed.
J. Risk Financial Manag. 2025, 18(10), 552; https://doi.org/10.3390/jrfm18100552
Submission received: 18 August 2025 / Revised: 18 September 2025 / Accepted: 20 September 2025 / Published: 1 October 2025

Abstract

This paper’s goal was to determine the state of green financing and reveal the main aspects of its regulation and influence on environmental risk management in the conditions of the growth of global uncertainty. Based on the sample that contains the top 10 countries of the world with a higher level of green economic capabilities in 2024, by the assessment for developed and developing countries in isolation, we performed regression analysis of the following: (1) Dependence of environmental costs of GDP on the volume of green investments; (2) Dependence of the volume of green investments on the application of the measures of state regulation of green finance. As a result, we proved that in developed countries, the growth of the activity of green investing in the economy leads to a reduction in the environmental costs of GDP, and in developing countries, an increase in the environmental costs of GDP. Unlike developed countries, in which green investments are not determined by the influence of the factors of state regulation, the implementation of the measures of state regulation of green finance in developing countries ensures the inflow of green investments into the economy. This paper’s novelty, compared to the existing literature, is that it discloses previously unknown differences in the character of the influence of the factors of state regulation of green finance on green investments in the economy and differences in the consequences of the activity of investing for environmental risks in different categories of countries (in particular, differences between developed and developing countries) and at different phases of the economic cycle (in the conditions of relative stability and in the conditions of global instability). The established regularities of the development of green finance under the influence of state regulation measures in developed and developing countries will raise the precision of forecasting and planning of this development in support of green economic growth and decarbonization. The revealed differences between developed and developing countries will allow forming a strategy of development of green finance in each category of countries, given their specifics, and thus, achieving the growth of these strategies’ effectiveness. The proposed policy implications for the reduction in environmental risks through the improvement of state regulation of green finance in developed and developing countries, given their revealed specifics, have practical significance.

1. Introduction

At present, the world is in a period of global uncertainty. The main reasons for this are the deterioration of the security situation in different regions of the planet, the escalation of trade conflicts, and the reduction in the level of support for sustainable development initiatives at the global level. Political and economic fragmentation, combined with an increase in geopolitical tension, growth of economic instability, and reduction in the effectiveness of international cooperation, led to an increase in environmental, energy, and socio-economic risks (World Economic Forum, 2023). Exacerbation of the above processes, combined with climate risks, frequent natural catastrophes, depletion of natural resources, and destruction of environmental systems, facilitates an increase in system uncertainty (Intergovernmental Panel on Climate Change, 2022). This situation leads to the necessity for rethinking economic, political, and social models, which are based on the concept of resilience, climate-responsible policy, and green investing.
In many cases, political, economic, or security goals acquire a higher level of priority; thus, the formed mechanisms of support for climate, environmental, and socially significant projects reduce their potential. In these conditions, green finance acquires a special role as a strategic tool that can support green transition due to its ability to reduce environmental threats and raise the resilience of socio-economic systems in the long term, with simultaneous support of a sufficient level of economic motivation, which will raise the level of macro-economic stability (Flammer, 2021).
The modern state of the green finance market is in the dynamic phase of formation, with parameters of volatility and fragmentarity of the regulatory and legal framework, and inequality of the distribution of assets between countries, sectors, and economic agents. In these conditions, the existing approaches to regulating green finance require further improvement and development, which is achieved due to a combination of economic, institutional, and social levers, support of transparency and predictability, and development of effective mechanisms of support for the high level of investors’ interest in an environmentally responsible direction of development. This leads to the need for the comprehensive theoretical and practical substantiation of the directions and approaches to regulating green finance through the lens of environmental risk management and support of sustainable development policy in the context of the world economy’s turbulence.
This paper’s novelty, compared to the existing literature, is that it discloses previously unknown differences in the character of the influence of the factors of state regulation of green finance on green investments in the economy and differences in the consequences of the activity of investing for environmental risks in different categories of countries (in particular, differences between developed and developing countries) and at different phases of the economic cycle (in the conditions of relative stability and in the conditions of global instability).
This paper’s goal was to determine the state of green financing and reveal the main aspects of its regulation and influence on environmental risk management in the conditions of the growth of global uncertainty. Achievement of this goal involves solving a range of tasks, which include substantiation of the relevance of the problem of global uncertainty and its nature, disclosure of the essence of green finance and its specifics, determination of the characteristics and classification of green financial tools, analysis of the volumes of green finance markets in the context of the corresponding tools, and description of the specifics of their regulation in the context of further perspectives.

2. Theoretical Review

2.1. Mechanisms

The theoretical substantiation of the topic of the research has a complex nature and is characterized by a wide presentation in scholarly and expert sources. Its basis is formed by the establishment of the essence and nature of green finance as an interdisciplinary phenomenon, which combines economic, environmental, and social components with financial activities (Bhatnagar & Sharma, 2022) and characterizes their evolution in the context of the development of sustainable investing tools (Climate Bonds Initiative, n.d.; Gilchrist et al., 2021; Flammer, 2021). Proving the effectiveness of green finance in the context of climate challenges (Muchiri et al., 2025) determines the relevance of its usage in the management of environmental risks, which is supplemented by the context of political and economic uncertainty and demand for the formation of reliable regulatory tools to minimize its influence (Dziwok & Jäger, 2021).
Transformation of the system of green finance in response to the aggravation of environmental risks (Intergovernmental Panel on Climate Change, 2022) is characterized by establishing their role in the global risk matrix (World Economic Forum, 2023), which is regulated through standards and models of green financing (Nedopil et al., 2021) with special attention to developing countries (Tavares et al., 2024). At that, the complex nature of green financing is determined, which uses diverse methods and tools, including investments in low-carbon projects (OPEC Fund, 2025), clean production technologies and innovations, green bonds and loans (Gilchrist et al., 2021), and combines forecasting, regulatory, and technological activities to manage the risks of sustainable development (Tao et al., 2022).
The important directions for theoretical research on the considered problems include establishing the role of China in the development of green financial infrastructure (Fu et al., 2023; Feng et al., 2023; Pangarkar, 2024), studying the dynamics of global climate flows (Naran et al., 2024), and assessing the institutional design and regulatory support of green finance (APEC Energy Working Group, 2018), which are studied in the global and regional contexts (Ergasheva et al., 2023; Kantor et al., 2023). This allows stating an important role of green finance not only in global economic processes but also in ensuring adaptation to climate and environmental risks.
The key theoretical constructs of this research are as follows:
ESG investments, which are investments made during the manifestations of environmental (E) and social (S) responsibility, and also under the condition of the high quality of corporate governance (G) (Bhatia et al., 2025; J. Liu & Liang, 2025);
Green finance, which is financial resources aimed at environmental protection and the fight against climate change (B. Li et al., 2025; Shi & Yang, 2025);
Greenwashing, which is the practice of unfair advertising in which companies provide false information about their green initiatives and environmental parameters of their economic activities (Inderst & Opp, 2025; L. Wang et al., 2025).

2.2. Regulatory Framework

The problem of regulating green finance from the position of environmental risk management in the conditions of an increase in global uncertainty has an interdisciplinary character, which requires the combination of theoretical concepts of sustainable development, finance and investments, risk management, and institutional economics. The methodological basis of this research is formed by the system approach, which allows studying green finance from the position of multi-level interaction of legal, economic, environmental, and political institutions in the conditions of a dynamic global environment. This approach allows forming a comprehensive understanding of the processes of development and regulation of green finance and assessing the multitude of interconnections between their varieties from the position of influence on environmental risks.
The strategic character of the topic of this research determined the need for using the methods of theoretical analysis and generalizing scholarly literature, as well as analyzing the reports of such specialized international organizations as the Climate Bonds Initiative, Climate Policy Initiative, IPCC, OPEC Fund, and the World Economic Forum. This allowed for the systematization of the current approaches to regulating green finance and formulating classification signs of green financial tools. We used the structural and functional approach to study the interdependencies of the factors of global uncertainty, the growth of climate risks, and the influence of green finance on environmental and economic processes. This allowed distinguishing the basic directions and tools of regulating the processes of sustainable financing and studying the role of regulatory support, mechanisms of stimulation of environmentally responsible activities, impact investing, etc.
We used an integrated approach, which envisages the combination of the system, classification, and functional analysis. This allowed for the classification of green financing tools, which belong to different groups by the following functional signs: accumulation of capital (bonds, loans, and investments), government stimulation (climate finance, tax stimuli), transformation of resources (investment funds, crowdfunding), and distribution of risks (insurance). This approach allows for considering green finance as a sub-system of the modern financial system. A specific feature of this sub-system is a clear focus on the achievement of the Sustainable Development Goals through redirecting financial flows, accumulating them for the achievement of sustainable goals, and using fiscal tools that adjust market tools of the state regulation of the economy.
Apart from this, the methodological framework of this paper is formed by the methods of induction, deduction, comparative analysis, and content analysis. They allow for assessing the aspects of the development of green finance and the system of their regulation in different regions, determining problems and directions for their resolution, tracking the dynamics and structure of green financing, and forming general conclusions on the effectiveness of regulatory approaches and their influence on environmental safety.

2.3. Classification and Conceptual Framework of Green Financial Tools

In the conditions of strategic planning of economic models, the notion of predictability of the future is very important. However, as of now, the level of this predictability is being reduced, which draws attention to the problem of uncertainty and risk. The notion of uncertainty traditionally has a negative context, which is due to the absence of complete or partial information about expectations in a certain sphere. Such uncertainty in the economy is closely connected with risks, and it is considered a system characteristic of the market environment within which these risks emerge. Their existence requires additional resource support (creation of reserves and additional production capacities), decisions based on incomplete information (risk of loss or shortfall in profit due to the selection of the non-optimal alternative), or use of protective mechanisms (insurance, diversification, organizational measures, etc.).
In this context, it should be noted that despite the domination of negative associations connected with risks and uncertainty, the attitude towards these phenomena is reconsidered. This is characterized primarily by the close connection with the financial sphere, in which some financial tools function only due to uncertainty and risk. Thus, derivatives (options, futures, swaps) and other complex financial tools function based on assessing the probabilities of events and connected risks, which are integrated into the models of pricing and speculative trading. Accordingly, uncertainty and risk directly influence financial strategies, investment activity, and actions in the sphere of state regulation.
From the position of globalization, factors of uncertainty are treated as systemic phenomena that are interconnected. Given this, geopolitical instability, pandemic, climate phenomena, and financial and energy crises often lead to cascade processes, which reduce the precision of long-term forecasts and are difficult to manage. In this context, environmental risks that are connected with the destruction of natural ecosystems, the growth of greenhouse gas emissions, loss of biodiversity, and deterioration of access to water resources are manifested not as isolated but as interconnected processes, which require a complex approach to their analysis and management.
Integrating the concept of sustainable development with financial processes and systemic risks is rather difficult. It covers different spheres and sectors of activities, touches on sensitive topics, and addresses a range of applied and theoretical problems. However, this synthesis offers new opportunities for the systemic transformation of socio-economic models. At that, green finance obtains a special role, being, at the same time, the tool for the mobilization of resources to solve environmental problems and the means to reduce systemic risks through the support of adaptation to climate change, low-carbon development, etc.
In the conditions of the market economy, finance performs a range of important functions, which include the redistribution of resources, stimulation of economic development, etc. Stimulation of socially important but unprofitable spheres of activity is not among the direct functions of finance. In this context, financing environmental and climate initiatives (so-called green finance) requires additional support, which is provided through the use of important institutional levers. Given this, regulating green finance facilitates its accessibility and the clarity of the use of economic mechanisms for sustainable development. Green financing is considered together with the process of achieving the UN Sustainable Development Goals. Its main focus is considered from the position of the influence on decarbonization through investing in eco-friendly and low-carbon projects. Within the search for institutional levers of stimulation of green financing, attention should be paid to the desire for the improvement of environmental and social effectiveness, which is achieved through integrating ESG factors into the system of the strategic management of investments (Fu et al., 2023).
In these conditions, the potential of so-called impact investing is taken into account; it involves investors’ consent to lower profitability for obtaining non-financial benefits or hidden long-term profit (Fu et al., 2023). Non-financial benefits could be presented by different factors, including wider access to financing, a positive image of the company among stakeholders, receipt of tax stimuli, government guarantees, etc. In turn, long-term profit lies in mitigating the negative consequences of global environmental and climate processes, which influence or can potentially influence the results of the company’s activities, its resource support, or conditions of functioning.
The development of green finance is based on the change in approaches to financial processes due to consideration of the possibility of their impact on the environment. Unlike general finance, resources aimed at solving environmental problems take into account the possibility of receiving environmental effects from the position of support of long-term perspectives, or the reduction in the negative influence of climate risks on production, the consumer sphere, or national policy. Green finance functions in the conditions of a complex system, which involves the combination of financial and investment conditions, government and global institutions, and individual economic players and consumers, each of which has its influence on the general state of the problem.
The main participants of this system are public authorities, international institutions, environmental establishments, important investors, etc., who agree to their actions for financing environmentally responsible projects in the context of achieving the Sustainable Development Goals, including SDG 7 and SDG 13. On the whole, 12 of 17 Sustainable Development Goals could be financed through green financing (Tavares et al., 2024).
Green, or environmental, finance is disclosed through three main directions in scientific research: through innovative financial tools, financing energy transition, and interaction with business in the context of ESG management. Innovative financial green tools are developed not only in the process of searching for new means of attracting resources for environmental goals and their distribution, but also for the possibility of tracking carbon emission and eco-friendly consumption, the development of fiscal tools for the stimulation of environmentally responsible behaviour, etc. Apart from financial support, the energy transition involves the necessary financial calculations and research, resolution of energy imbalances, the search for directions for optimizing the cost of alternative energy solutions, etc. The ESG approach is based on the search for directions for the standardization of the methodology of assessing environmental, social, and governance effectiveness (Nedopil et al., 2021).
The active development of the green finance concept began after the 2009 recession, when it became clear that traditional financial systems do not take into account the environmental consequences of economic activities. Green finance is a financial tool whose action is aimed at reducing greenhouse gas emissions, increasing the level of energy efficiency, preserving biodiversity, and achieving other environmental and social effects. They are not the elements of charity, but they ensure the balance of economic and environmental results. In this context, green financing ensures the flexible redistribution of financial resources and contributes to the formation of profitability points, from individual types of activities to entire sectors (Feng et al., 2023).
The practical components of green finance envisage its institutionalization through integration into the regulatory and legal field, regulatory acts, standards, provisions, etc. At least 46 mechanisms of green financing are distinguished, which can be unified within the following categories: government green financing, investment funds, private investing, financing by banks and credit establishments, public–private partnership, direct foreign investments, and diversified capital markets (Tavares et al., 2024).
As of now, the regulatory environment of the green financing market is rather developed. It covers around 400 regulatory and legal acts, initiatives, standards, regulatory provisions, and norms that are adopted at the global or national levels. Apart from this, a large number of acts are used by individual establishments, funds, companies, and organizations. The basis for this regulatory support is formed by the UN Principles for Responsible Investment (PRI), the Environmental and Social Policy Framework, the IFC standards, and indicators of environmental development developed by TCFD, ICMA, etc. These norms cover the full life cycle of financial operations, from the attraction of capital to reporting on its use (Nedopil et al., 2021; Tao et al., 2022).
Development of green finance is based on the systemic support of operations connected with an increase in volumes of financing, their penetration into different spheres of economic activities, and the growth of the positive impact on environmental processes. According to studies, the largest effect on green financing is performed by ten general factors, such as macro-economic favourable conditions, development of the regulatory structure, improvement of the investment environment, growth of investment potential, creation of a favourable investment environment, improvement of potential, growth of the forms of institutional involvement, technologies and technological progress, financial policy and financial tools, development of a capital market, and a favourable political environment (Bhatnagar & Sharma, 2022).
Regulating green finance and managing environmental risks form a unified system, within which financial initiatives and processes mitigate the negative implications of risks or prevent them. The regulatory base of green finance is formed by the regulatory, institutional, and tool bases, through which rational redistribution and movement of financial resources are performed to solve environmental problems and raise the sustainability of socio-economic development. The system of green finance regulation includes not only regulatory provisions but also rules and standards, demands, and stimuli, which direct the actions of the market participants in support of environmentally responsible initiatives and the reduction in the influence of negative factors on the environment. The main functions of green finance regulations consist of the following: formation of trust to green financial tools through application of the corresponding standards, prevention of the imitation of the process of green financing or greenwashing due to the tools of audit and certification, mobilization of financial resources through crowdfunding tools, tax and market levers, reduction in investors’ risks in the sphere of environmental projects, monitoring and assessment of the effectiveness of investing in green initiatives.
Green finance was formed as a tool for opposing global environmental and climate challenges. They are based on the factor of resource support of environmental innovations and market mechanisms, which can reduce the negative anthropogenic influences on the environment. Green finance is of a complex nature and differentiated character. Depending on the sphere of application, form, and purpose, it covers different mechanisms and tools, which are based on the concepts of cyclical economy, sustainable development, environmental modernization, etc.
At present, there is no unified approach to the classification of green finance; however, among the existing approaches, it is possible to distinguish eight main financial tools of this type, which are rather different and are used within different mechanisms of influence on environmental and climate processes (Figure 1).
The classification of green financial tools in Figure 1 is based on the following three criteria. 1st criterion: Initiation (area of emergence) of green finance; by this criterion, they are differentiated into those initiated by the government (green tax incentives) and those emerging in the market (all others).
2nd criterion: The primary goal—this is the criterion differentiation of green finance aimed primarily at receiving profit and meant to be financially and economically effective (green bonds, green loans, green insurance, and green investment funds) and green finance for which the primary goal is connected with environmental care, including the fight against climate change—they do not necessarily have to be (though they usually are) financially and economically effective, for the main aspect is their environmental contribution (ESG-based investments, green tax incentives, climate finance, and green crowdfunding).
These functional groups (criteria) were selected for the compiled classification because, in aggregate, they explain the internal structure of green finance in the most detail. Due to this, the compiled classification discloses the content and scientific and economic sense of GrFn, explaining the role of green investments in the system of green finance, as well as the logic, opportunities, and limitations of the application of the measures of state regulation of green finance on the whole and green investments in particular. Thus, GrFns (green investments) include the following categories of green finance from Figure 1: green bonds, green investment funds, ESG-based investments, and climate finance.
3rd criterion: Sphere of national policy in which the regulation of various types of green finance takes place. By this criterion, there are examples of green finance regulated mainly with the help of government financial and economic policy (green bonds, green loans, green insurance, and green tax incentives) and green finance regulated mainly with the help of government environmental (including climate) policy (ESG-based investments, green investment funds, climate finance, and green crowdfunding).
The above list includes bonds, bank loans, direct investments, investment funds, climate finance, insurance products, fiscal government tools, and crowdfunding. Each of the above tools, in the context of green financing, is used to initiate, support, or strengthen actions aimed at solving climate and environmental problems, or to form the corresponding preconditions. Thus, green bonds are tools of capital mobilization to implement environmental and climate projects. Green bonds are aimed at crediting companies that conform to the criteria of environmentally responsible business. ESG investing is a tool for stimulating companies to engage in environmental activities and the corresponding reporting. Good results in the sphere of non-financial activities in this context are the criterion for the improvement of access to financial resources.
Green investment funds work in the conditions of a closed-cycle economy, according to which they involve private and institutional finance for investing in environmental projects. At that, the return of funds invested in these projects is redirected to other activities, thus ensuring a cyclical and closed use of resources to achieve the Sustainable Development Goals. Climate finance is a tool of the redistribution of financial resources through their movement from developed countries (responsible for the prevailing amounts of greenhouse gas emissions and damage to the environment) to countries with a lower level of development, most of which face the negative impact of climate change or do not have sufficient resources to adapt to climate change.
The tool for compensating losses from environmental and climate risks is green insurance. It allows for partial compensation of economic losses and increases the level of environmental safety. Tax stimuli and subsidies are the tools of modelling the environmentally responsible behaviour of economic agents through pricing and cost stimulation of their activities within the existing economic models. Green crowdfunding is a tool of the financial involvement of the public in different environmental initiatives. Its specifics lie in the fair character of financial resources, which conforms to the principles and goals of sustainable development.
According to the interactive platform Climate Bonds (Climate Bonds Initiative, n.d.), the aggregate emission of climate bonds reached USD 870 billion in 2023. Since 2007, the total cost of accumulated green bonds has reached USD 4.2 trillion. This volume is formed by green and social bonds, as well as sustainable development bonds. The green share of these debt instruments was USD 587.3 billion (68%) in 2023. The main emitter of green bonds, with the indicator of USD 309.6 billion (53% of their total volume) in 2023, was Europe. The Asia-Pacific region was ranked second (USD 189.4 billion). China’s share was USD 189.4 billion. The high volume of green bond emissions, which exceeds USD 500 billion, was retained over 2021–2023. In 2020, this indicator barely reached USD 300 billion; in 2014, it equalled USD 37 billion. Over the course of ten years, the volume of emitted green bonds grew by more than 15 times. The emission of 70% of green bonds was provided by highly developed countries, 27% by developing countries, and the remaining share accounted for supranational green bonds, which are not connected to any country (Climate Bonds Initiative, n.d.).
By the type of emitters, approximately equal shares of green bond emissions were accounted for by non-financial (USD 171.8 billion, or 29% of the market) and financial (USD 163.4 billion, or 28% of the market) corporations. The share of sovereign green bonds was also large (USD 119.9 billion, or 20.4%). According to the directions of using funds attracted with the help of green bonds, the first place belongs to the energy sphere, which accounted for USD 205.7 billion (3.0%), transport—USD 205.7 billion (3.0%), and construction—USD 205.7 billion (3.0%). Their aggregate share equalled 75.0% (Climate Bonds Initiative, n.d.). The total volume of the green financing market was assessed at USD 3.2 trillion in 2023. An increase of up to USD 22.8 trillion is expected by 2033 (Pangarkar, 2024).
In the sphere of green finance, the volume of loans aimed at solving socially responsible and environmental tasks is also large. The total volume of such loans exceeded USD 780 billion in 2023. In this volume, the share of green bonds equalled USD 207.0 billion (26.5% of the total volume). In 2021, the volume of green loans equalled only USD 36.1 billion, which is six times less than in 2023. Most of the loans of this type were issued on the terms of the Credit Facility, and others on the terms of refinancing. The use of other crediting tools for environmental projects was insignificant (Environmental Finance Data, 2025).
In the structure of direct investments, the main direction of investing is renewable energy, which accumulated more than USD 258 billion in 2024. Among them, the largest volume of investments accounted for green hydrogen and other new clean technologies (USD 116 billion or 45%), solar energy—USD 84 billion (32.6%), and wind energy—USD 40 billion (15.5%). Compared to 2023, the volume of investments in renewable energy decreased by 30%, which was caused primarily by the reduction in investment attractiveness of speculative projects in the sphere of green hydrogen and other clean technologies (Irwin-Hunt, 2025).
As of 2024, sustainable development funds managed assets worth USD 3.56 trillion. However, their average profitability was far behind the profitability of traditional investment funds (0.4% vs. 1.7%). Most of the investments of sustainable development funds account for Europe (24.4%) or the entire world (45.6%), while traditional investment funds invest mostly in America and the Asia-Pacific region (Morgan Stanley Institute for Sustainable Investing, 2025). In the first quarter of 2025, global sustainable development funds faced a record outflow of assets, which reached USD 8.6 billion, compared to the previous quarter. The main initiators of the withdrawal of funds were American investors. For the first time since 2018, the net outflow of funds was observed in Europe (-USD 1.2 billion compared to the inflow of USD 20.4 billion in the previous quarter) (Morningstar, 2025). The reduction in the level of the average profitability of the global funds of sustainable development and the trend of capital outflow from them are important signals, which may have a negative effect on the entire system of green finance and sustainable development.
The volumes of climate finance in previous years demonstrated positive dynamics, but they remain insufficient for the achievement of the Paris Agreement goals. In 2022, the volume of financing in this sphere achieved USD 1.27 trillion (Naran et al., 2024), but the annual need for funds is expected to equal USD 8 trillion by 2030, with further growth up to USD 10 trillion (OPEC Fund, 2025).
Given an increase in the regulatory pressure of global and national institutions and the growth of environmental demands, the market for green insurance is characterized by large prospects. Among the main types of these services, it is possible to distinguish Pollution Legal Liability Insurance (covers costs of cleaning, court expenses, and third parties’ claims which emerge due to environmental incidents) and Contractors Pollution Liability Insurance (provided to contractors who work in spheres with an increased environmental risk). The total volume of the green insurance market in 2024 was assessed from USD 1.26 billion (Global Market Statistics, 2025) to USD 3.8 billion (Verified Market Research, 2025), with expected growth.
The structure of green finance is peculiar for a gradual increase in the influence of green fiscal tools, which include emissions trading systems (ETS), carbon taxes, environmental excise taxes, green technologies subsidies, etc. These tools are important for restraining or stimulating economic activities. As of 2023, the sum accumulated from taxes on CO2 emissions reached a record USD 104 billion. A total of 75 global tools of carbon pricing were used, which covered only 24% of the world’s CO2 emissions. Despite this, it should be noted that only 1% of emissions are taxed at the recommended rate of USD 63–127 per 1 ton of CO2 (for the achievement of the Paris Agreement goals). The main sources of tax revenues are still fuel excise taxes, while greenhouse gas emissions are barely taxed in other sectors (Twidale, 2024a). The global carbon market is also growing; it reached USD 949 billion in 2023. A total of 87% of the market accounted for European countries (Twidale, 2024b). Assessing the total volume of the crowdfunding market at USD 1.17 billion (Market Research Future, 2025), it is impossible to precisely calculate the share of the green initiatives segment. Crowdfunding in the sphere of renewable energy has a very important role, together with technological solutions, solutions in healthcare, real estate, and services.
Thus, trends in the development of green financial tools demonstrate the formation of a global system of accumulation and use of funds for solving environmental problems and raising the level of resilience against environmental risks. The volume and dynamics of green financial processes show the presence of positive trends peculiar to the recent period. However, there are frequent manifestations of trends of slowdown in the growth of green financing markets, or even their reduction. These trends reflect the growth of general global uncertainty and form disturbing economic signals. At the same time, even under the condition of the preservation of positive trends, the volume of green financing does not conform to the general need, determined by the Paris Agreement, to restrain the growth of world temperature at the level of 1.5 °C.
Given the revealed aspects, it is necessary to note the presence of regulatory challenges in the sphere of green finance caused by insufficient standardization and the fragmentary character of the applied measures. The transition of green financial initiatives from voluntary contributions to mandatory regulated payments was ensured through gradual unification and standardization, as well as the coordination of regional differences. These actions were accompanied by the integration of climate risks into prudential supervision, which involves consideration of environmental factors during the execution of traditional financial and credit operations. At the same time, processes of the creation of the system of monitoring and verification of financial flows took place, together with the search for ways to balance regional, sectoral, and instrumental imbalances. Despite all measures taken, the regulatory mechanism in the sphere of green finance did not allow ensuring the sufficient financing of global environmental and climate goals. Against this background, disturbing signals of capital outflow from sustainable development funds and the reduction in the profitability of green investment require the reconsideration of approaches in regulating the studied sphere through stimulation of green financing by private investors, integration of climate risks into the financial regulation system, improvement of global harmonization of standards, and adaptation of measures of regulation to the conditions of growing global uncertainty.

2.4. Empirical Results

The critical analysis of the existing literature revealed a contradiction: on the one hand, the literature states the necessity for the development of green investments in all countries of the world, but on the other hand, it notes serious differences in the institutions of the green financial economy between developed and developing countries. This does not allow developing a unified universal approach to the development of green finance in all countries and requires consideration of the specifics of each category of countries in isolation; little knowledge and uncertainty of these specifics are a literature gap.
The literature review revealed three key environmental risks, manifested at the scale of the macro-economy and associated with an increase in the environmental costs of GDP: growth of natural resources rent (Al-Rawashdeh et al., 2025—EvCs1), growth of energy intensity (Azimi et al., 2025—EvCs2), and growth of carbon emissions (Lu et al., 2025—EvCs3).
We also established three key factors of state regulation of green finance, noted in the existing literature sources: strength and financial affordability of the legal regulation of administrative disputes (H. Li et al. (2025)—Gvn1), its timeliness (Susan & Pan, 2024—Gvn2), and the protection of investors’ property rights (Z. Wang et al. (2025)—Gvn3).
However, the character of the influence of the factors of the state regulation of green finance on the activity of green investment in the economy, as well as consequences of these activities for the environmental risks in different categories of countries (in particular, differences between developed and developing countries) and at different phases of the economic cycle (in the conditions of relative stability and the conditions of global instability), are poorly studied and unknown. This is a literature gap, which this paper intends to fill. This paper’s design (its conceptual basis) is shown in Figure 2.
According to Figure 2, the following two hypotheses are checked in this paper:
Hypothesis H1.
Consequences of an increase in green investments (GrFns) for the environmental costs of GDP—environmental risks of the economy: natural resource rent of GDP and carbon emissions—different among the categories of developed and developing countries. In the mathematical expression, H2 envisages that regression coefficients at the factor variable GrFn in models with simple linear regression with resulting variables EvCs1, EvCs2, and EvCs3 must take different values (have different signs) in the models for developed and developing countries. The hypothesis is offered based on the latest research by Guo and Zhao (2025) and Xu et al. (2025), in which the advantages of green investments for the ecologization of the economy, including its decarbonization, are disclosed.
Hypothesis H2.
Measures of state regulation of green finance—improvement of strength and financial accessibility of legal regulation of administrative disputes, and increase in its timeliness, as well as growth of protection of investors’ property rights, allow for increasing the activity of green investments in the economy. In the mathematical expression, H2 envisages that regression coefficients at factor variables Gvn1, Gvn2, and Gvn3 in the multiple regression model with the resulting variable GrFn must take positive values. The hypothesis was offered based on the latest research by Chemmanur et al. (2025) and Kang et al. (2025), which discusses international experience and indicates wide opportunities for state regulation of green investments.

3. Materials and Methods

In the empirical part of this research, we perform an econometric study to reveal the cause-and-effect relationships of the development of green finance. At the first stage, the method of regression analysis is used to establish the following dependencies (based on Table 1 and Table 2):
Environmental costs of GDP—natural resources rent (EvCs1 according to the statistics by the World Bank, 2025c), energy intensity (EvCs2 according to the statistics by the World Bank, 2025b), and carbon intensity (EvCs3 according to the statistics by the World Bank, 2025c) based on the data from Table 2—on the activity of green investment in the economy (GrFn according to the statistics by the Global Green Growth Institute (2025) based on the data from Table 1);
Activity of green investment in the economy (GrFn) on the factors of state regulation of green finance—strength and financial affordability of legal regulation of administrative disputes (Gvn1), its timeliness (Gvn2), and protection of investors’ property rights (Gvn3), according to the statistics by the UN (2025) based on the data from Table 3.
The research model has the following form:
EvCs1 = a1 + b1GrFn,
EvCs2 = a2 + b2GrFn,
EvCs3 = a3 + b3GrFn,
GrFn = a4 + b4Gvn1 + b 5Gvn2 + b6Gvn3.
A separate model is prepared for each category of countries: for developed and developing countries. At different signs b1, b2, and/or b3 in models with simple linear regression with the resulting variables EvCs1, EvCs2, and EvCs3 for developed and developing countries, the hypothesis H1 is deemed proven (and in the opposite case, i.e., if all signs coincide—disproven).
In case of timely observation of the three following conditions: b4 > 0, b5 > 0, and b6 > 0 in the model of multiple regression with the resulting variable GrFn, the hypothesis H2 is deemed proven (and in the opposite case—disproven). The basic diagnostic checks of the quality and reliability of the research model (1) are multiple R, R-square, standard error, and significance F (F-test).
The research sample contains the top 10 countries with the highest level of green economic capabilities in 2024, according to the Global Green Growth Institute (2025). The advantage of the compiled sample is prevention of regional bias—for the research not to focus too much on one country/region and to show international results, we put in the sample countries from different regions of the world, including five developed (Denmark, Finland, Germany, South Korea, and the USA) and five developing (Armenia, China, Malaysia, Russia, and Slovakia) countries. The choice of these ten countries for the research is explained by the fact that green finance is most developed in these countries.
To take into account the role of the institutional environment in regulating green financing in the interests of environmental risk management, the research is conducted by the example of two groups of countries: developed and developing, which are presented equally in the sample. The regression analysis is performed based on the statistics for 2022–2024, because this is the most recent period of global instability, caused by the international sanctions crisis.
At the second stage, to consider the role of cyclicity in the regulation of green financing in the interests of environmental risk management, the correlation analysis is used to assess the connection between the activity of green investment in the economy and the set of environmental costs of GDP and the set of factors of state regulation of green finance.
The correlation is calculated separately for developed and developing countries for each period: in 2019 (as a period of relative global stability) and in 2022–2024 (as a period of global instability). The obtained values of correlation coefficients are then compared. Thus, we find the character and scale of change in the cause-and-effect relationships of the development of green finance under the influence of economic cyclicity in different categories of countries.
The data on Armenia are absent in Table 3, because statistical accounting of state regulation of green finance in this country is not conducted. However, the absence of data on Armenia does not have a significant impact on the reliability of the research results, since there are all the necessary statistics on the other nine countries.
At the third stage, to reveal the perspective of reducing environmental risks through the improvement of state regulation of green finance, based on the obtained regression model, we forecast the growth of the activity of green investment in the economy in case of optimization (raising to 1 point) of the factors of state regulation of green finance and forecast the consequences of this for environmental costs of GDP. We compiled two separate forecasts for developed and developing countries, given the differences in the regression models of cause-and-effect relationships of the development of green finance in these categories of countries.

4. Results

4.1. General Results

Based on the sample which includes the top 10 countries with the highest level of green economic capabilities in 2024, according to the Global Green Growth Institute (2025), in isolation in developed (Denmark, Finland, Germany, South Korea, and the USA) and developing (Armenia, China, Malaysia, Russia, and Slovakia) countries, regression analysis was conducted: (1) Dependence of environmental costs of GDP (environmental risks of the economy)—natural and resource rent of GDP (EvCs1), energy intensity of GDP (EvCs2), and carbon emissions (EvCs3) on the volume of green investments (GrFn); (2) Volume of green investments (GrFn) on application of the measures of state regulation of green finance—strength and financial accessibility of legal regulation of administrative disputes (Gvn1), its timeliness (Gvn2), and protection of investors’ property rights (Gvn3).
In the course of the performed empirical study, the following results have been obtained. As a result of the first stage of the research, the regression analysis of the statistics from Table 1, Table 2 and Table 3 for 2022–2024, we compile econometric models, which disclose the cause-and-effect relationships of green finance development (Table 4).
The performed basic diagnostic checks of quality and reliability of regression statistics in Table 4 showed that the volume of green investments (GrFns) determines, to a different extent, environmental costs of GDP (environmental risks of the economy); natural resource rent of GDP—by 36.11% in developed (R-square = 0.1304, standard error: 0.3024) and by 30.78% in developing countries (R-square = 0.0947, standard error: 5.1085); energy intensity of GDP—by 48.26% in developed (R-square = 0.2329, standard error: 6.0158) and by 54.88% in developing countries (R-square = 0.3012, standard error: 2.0235); and carbon emissions—by 14.14% in developed (R-square = 0.0200, standard error: 0.0647) and by 43.97% in developing countries (R-square = 0.1934, standard error: 0.1009).
F-test was passed in the model for EvCs1 in developed countries at the significance level of 0.20, and developing countries—at the significance level of 0.30; in the model for EvCs2 in developed countries at the significance level of 0.10, and developing countries—at the significance level of 0.05; in the model for EvCs3—only for developing countries at the significance level of 0.15 (F-test was not passed for developed countries).
We also established that measures of state regulation of green finance—increase in strength and financial accessibility of legal regulation of administrative disputes and improvement of its timeliness, as well as growth of protection of investors’ property rights—determine the activity of green investments in the economy by 30.53% in developed (R-square = 0.0932, standard error: 6.8341) and by 89.43% in developing countries (R-square = 0.7999, standard error: 5.3663).
The F-test was passed in the model for GrFn only in developing countries, at the significance level of 0.01 (the F-test was not passed for developed countries). According to Table 4, the model (2) for developed countries is as follows:
EvCs1 = 1.5149 − 0.0177GrFn,
EvCs2 = −19.1298 + 0.5021GrFn,
EvCs3 = 0.0521 + 0.0014GrFn (F-test was not passed),
GrFn = 55.6649 + 14.1786Gvn1 + 1.7871Gvn2 + 0.9720Gvn3 (F-test was not passed).
where GrFn—Green investment (score 0–100);
EvCs1—Total natural resources rents (% of GDP);
EvCs2—GDP per unit of energy use (constant 2021 PPP USD per kg of oil equivalent);
EvCs3—Carbon intensity of GDP (kg CO2e per 2021 PPP USD of GDP);
Gvn1—Access to and affordability of justice (worst 0–1 best);
Gvn2—Timeliness of administrative proceedings (worst 0–1 best);
Gvn3—Expropriations are lawful and adequately compensated (worst 0–1 best).
The model (2) demonstrates that in developed countries, the growth of activity of green investment in the economy by 1 point leads to the reduction in all environmental costs of GDP; in particular, it ensures the reduction in total natural resources rents by 0.0177% of GDP and an increase in GDP per unit of energy use of 0.5021 constant 2021 PPP USD per kg of oil equivalent, but leads to the growth of carbon intensity of GDP by 0.0014 kg CO2e per 2021 PPP USD of GDP.
All considered factors of state regulation have a positive effect on green finance in developed countries. Thus, an increase in the strength and financial affordability of legal regulation of administrative disputes by 1 point leads to the growth of the activity of green investment in the economy by 14.1786 points.
An increase in the timeliness of legal regulation of administrative disputes leads to the growth of the activity of green investment in the economy by 1.7871 points. An increase in the protection of investors’ property rights leads to the growth of the activity of green investment in the economy by 0.9720 points. As shown in Table 4, the model (3) for developing countries is as follows:
EvCs1 = −4.2401 + 0.1498GrFn,
EvCs2 = 17.3772 − 0.1204GrFn,
EvCs3 = −0.0045 + 0.0045GrFn,
GrFn = 42.1262 + 3.4105Gvn1 + 26.5479Gvn2 + 12.3471Gvn3.
where GrFn—Green investment (score 0–100);
EvCs1—Total natural resources rents (% of GDP);
EvCs2—GDP per unit of energy use (constant 2021 PPP USD per kg of oil equivalent);
EvCs3—Carbon intensity of GDP (kg CO2e per 2021 PPP USD of GDP);
Gvn1—Access to and affordability of justice (worst 0–1 best);
Gvn2—Timeliness of administrative proceedings (worst 0–1 best);
Gvn3—Expropriations are lawful and adequately compensated (worst 0–1 best).
The model (3) demonstrates that in developing countries, the growth of the activity of green investment in the economy leads to an increase in almost all environmental costs of GDP, i.e., the systemic growth of environmental risks. In particular, the growth of the activity of green investment in the economy by 1 point leads to an increase in total natural resources rents of 0.1498% of GDP, reduction in GDP per unit of energy use by 0.1204 constant 2021 PPP USD per kg of oil equivalent, and growth of carbon intensity of GDP by 0.0045 kg CO2e per 2021 PPP USD of GDP.
At the same time, all considered factors of state regulation have a positive effect on green finance in developing countries. Thus, an increase in the strength and financial affordability of legal regulation of administrative disputes of 1 point ensures the growth of the activity of green investment in the economy by 3.4105 points.
An increase in the timeliness of legal regulation of administrative disputes contributes to the growth of the activity of green investment in the economy by 26.5479 points. An increase in the protection of investors’ property rights leads to the growth of the activity of green investment in the economy by 12.3471 points.
As a result of the second stage, which involved the correlation analysis of the statistics from Table 1, Table 2 and Table 3, we revealed the connection between the activity of green investment in the economy and the set of environmental costs of GDP and the set of factors of state regulation of green finance. Differences in the values of correlation coefficients between periods showed the role of cyclicity in the regulation of green financing in the interests of environmental risk management.
The results of the correlation analysis of the connection between the activity of green investment in the economy and the set of environmental costs of GDP, obtained for the category of developed countries, are shown in Figure 2, and with the set of factors of state regulation of green finance, in Figure 3.
Based on Figure 3, in developed countries, the connection between natural resources rent in GDP and the activity of green investment has almost no dependence on economic cyclicity: in 2019 (as a period of relative global stability), the correlation between these indicators was −0.49, and it is similar in 2022–2024 (as a period of global instability).
The consequences of the intensification of green investment for the energy intensity of GDP deteriorate slightly with the development of global instability: in 2019, their correlation equalled 0.54, it dropped to 0.51 in 2022, 0.49 in 2023, and 0.45 in 2024. Regardless of the cyclicity of the economy, green investment does not allow for a reduction in its carbon intensity, demonstrating a positive correlation between the corresponding indicators in all considered periods.
As shown in Figure 4, in developed countries, the connection between the strength and financial affordability of legal regulation of administrative disputes and the activity of green investment barely depends on economic cyclicity: in 2019 (as a period of relative global stability), the correlation between these indicators was 0.30—it is similar for 2022–2024 (as a period of global instability).
The consequences of the timeliness of legal regulation of administrative disputes for the intensification of green investment improve with the development of global instability: in 2019, their correlation was 0.25, and it went up to 0.37 in 2022, and 0.29 in 2024. The consequences of the protection of investors’ property rights for the intensification of green investment deteriorate with the development of global instability: in 2019, their correlation equalled 0.50, and in 2024, 0.32.
The results of the correlation analysis of the connection between the activity of green investment in the economy and the set of environmental costs of GDP, obtained for the category of developing countries, are shown in Figure 4, and with the set of factors of state regulation of green finance, in Figure 5.
As shown in Figure 5, in developing countries, regardless of the cyclicity of the economy, green investments do not allow for a reduction in the environmental costs of GDP. The activity of green investment in all considered periods demonstrated positive correlation with the natural and resources rent of GDP, negative correlation with energy intensity of GDP, and positive correlation with carbon intensity of GDP.
As shown in Figure 6, in developing countries, the consequences of the growth of the strength and financial affordability of legal regulation of administrative disputes for the intensification of green investment deteriorate with the development of global instability: in 2019, their correlation equalled 0.36, but it became negative in 2022–2024.
The implications of the timeliness of legal regulation of administrative disputes for the intensification of green investment deteriorate with the development of global instability: in 2019, their correlation equalled 0.09, but became negative in 2022–2024.
The implications of the protection of investors’ property rights for the intensification of green investment deteriorate with the development of global instability: in 2019, their correlation equalled 0.20, it dropped down to 0.01 in 2022, and became negative in 2023. Therefore, in the conditions of global instability, the possibilities for stimulating the growth of the activity of green investment through state regulation of green finance in developing countries are reduced.
As a result of the third stage, we revealed the perspective of reducing the environmental risks through the improvement of state regulation of green finance. The forecast of the activity of green investment in the economy in case of optimization (bringing up to 1 point) of the factors of state regulation of green finance, as well as consequences of this for environmental costs of GDP in developed countries, is compiled based on the model (1) and is shown in Figure 6, and the forecast for developing countries is built based on the model (2) and is shown in Figure 7.
According to the forecast shown in Figure 7, an increase in the strength and financial affordability of legal regulation of administrative disputes of 46.48%, and the growth of its timeliness by 29.65% in developed countries, will lead to the growth of the activity of green investment in the economy by 7.55%—from 67.51 points in 2024 to 72.60 points in the long term.
According to the forecast in Figure 8, an increase in strength and financial affordability of legal regulation of administrative disputes of 104.08%, the growth of its timeliness by 121.24%, and an increase in the protection of investors’ property rights of 166.43% in developing countries will contribute to the growth of the activity of green investment in the economy by 39.72%—from 60.43 points in 2024 to 84.43 points in the long-term. However, in both categories of countries (developed and developing), this will not ensure the reduction in environmental costs of GDP and will not allow for a decrease in the environmental risks of the economy.

4.2. Multicollinearity Test

To find the presence or absence of redundant variables, which distort the results, we performed a multicollinearity test of variables for developed countries—in Table 5, and for developing countries—in Table 6.
The results of the multicollinearity test from Table 5 revealed the absence of redundant variables in developed countries.
The results of the multicollinearity test from Table 6 revealed the absence of redundant variables in developing countries. Therefore, the results obtained are correct for both categories of countries.

4.3. Differences Between Developed and Developing Countries

In developed countries, the growth of the activity of green investing in the economy leads to the reduction in almost all environmental costs of GDP: it ensures a decrease in total natural resources rents and an increase in GDP per unit of energy use, but does not have a statistically significant effect on the carbon intensity of GDP. Unlike them, in developing countries, the growth of the activity of green investing in the economy leads to an increase in almost all environmental costs of GDP, i.e., systemic growth of environmental risks: an increase in total natural resources rents, a decline in GDP per unit of energy use, and growth of the carbon intensity of GDP.
Unlike developed countries, in which green investments are not determined by the influence of the factors of state regulation, implementation of the measures of state regulation of green finance—improvement of strength and financial accessibility of legal regulation of administrative disputes, an increase in timeliness of legal regulation of these disputes, and growth of protection of investors’ property rights in developing countries—ensures the inflow of green investments in the economy.
During interpretation of the results by groups of countries, it is necessary to pay attention to the fact that the observed differences among developed and developing countries (in particular, the strength of the GrFn–EvCs relationship) can be explained by the dominating type of the tools of regulating green finance in the economy (capital, incentive, risk). Thus, in the green economy of developed countries, the tools of market self-management dominate: returns on invested capital, market incentives, and investment risk. Unlike them, in the green economy of developing countries, tools of state regulation dominate: tax stimulation of green investments, co-financing of green capital from the state budget, and state guarantees on the return on green investments, which artificially reduce the investment risk.

5. Discussion

This paper’s contribution to the development of the scientific literature consists of the disclosure of previously unknown cause-and-effect relationships of the development of green finance. In particular, we specified the character of the influence of the factors of state regulation of green finance on the activity of green investment in the economy, as well as consequences of this activity for environmental risks in different categories of countries (differences between developed and developing countries) and at different phases of the economic cycle (in the conditions of relative stability and the conditions of global instability). The main results obtained in the course of the conducted empirical research are systematized in Table 7; they are also compared to the past literature.
As shown in Table 7, unlike Al-Rawashdeh et al. (2025), it was proven that green investment allows for the reduction in the natural resources rent of GDP only in developed countries, but not in developing countries. Unlike Azimi et al. (2025), it was established that green investment allows for the reduction in the energy intensity of GDP only in developed countries, but not in developing countries. Unlike Lu et al. (2025), it was revealed that green investments do not allow for the reduction in carbon emissions in developing countries, and the F-test was not passed in the regression model for developed countries.
It was also proven that all studied measures of state regulation of green finance allow for raising the activity of green investment: improvement of the strength and financial affordability of legal regulation of administrative disputes (in support of H. Li et al., 2025), increase in its timeliness (in support of Susan & Pan, 2024), and growth of the protection of investors’ property rights (in support of Z. Wang et al., 2025), but only in developing countries, and in developed countries these measures are ineffective (F-test was not passed in the regression model). Thus, the hypothesis H1 was proven, confirming Guo and Zhao (2025) and Xu et al. (2025): consequences of increasing green investments (GrFn) for environmental costs of GDP—environmental risks of the economy: natural resource rent of GDP, energy intensity of GDP, and carbon emissions—differ by the categories of developed and developing countries.
Unlike Chemmanur et al. (2025) and Kang et al. (2025), the hypothesis H2 was proven only for developing countries, in which measures of state regulation of green finance—an increase in strength and financial accessibility of legal regulation of administrative disputes and growth of its timeliness, as well as growth of protection of investors’ property rights—allow for raising the activity of green investing in the economy.
Empirical results, obtained as a result of the conducted research and generalized in Table 4, specified the classification of green finance from Figure 1, supplementing it with two new criteria: functionality of the measures of state regulation of green finance and their consequences for the environmental costs of GDP (environmental risks of the economy). By the criterion of their consequences for the environmental costs of GDP (environmental risks of the economy), based on the results of this paper, GrFns (green investments from Figure 1: green bonds, green investment funds, ESG-based investments and climate finance) can be divided into two new categories: (1) Green investments in developed countries, which reduce natural resource rent and raise energy efficiency of the economy; (2) Green investments in developing countries, which do not improve the above aspects of the state of the environment.
By the criterion of functionality of the measures of state regulation of green finance, based on the results of this paper, GrFns (green investments from Figure 1: green bonds, green investment funds, ESG-based investments, and climate finance) can be divided into two new categories: (1) Green investments in developing countries, which are easily treated by such measures of state regulation of green finance as improvement of strength and financial accessibility of legal regulation of administrative disputes and growth of its timeliness, and growth of protection of investors’ property rights; (2) Green investments in developed countries, to which it is difficult to apply the above measures of state regulation.
It was identified that measures of state regulation of green finance in developing countries are much more effective for the intensification of green investment than in developed countries. However, due to global instability, the contribution of the measures of state regulation of green finance to the intensification of green investment visibly reduces in developing countries and grows in developed countries.
Analysis of green finance regulation and environmental risk management in the conditions of an increase in global uncertainty demonstrated the problems of the complex dynamics of the development of financial systems under the influence of environmental challenges and threats. The main problems of this discussion emerge at the stage of determining and classifying green finance, due to the absence of a unified view of their nature, the presence of diverse regional features of their treatment and application, and the dynamic nature of the financial market in the conditions of the growth of regulatory pressure in the sphere of ecology. In this context, the absence of a common, generally acknowledged approach to the classification of green finance and differences in standards leads to the fragmentarity of their research.
The very architecture of the regulation of the green finance market also forms a separate topic for discussion. It requires coordination of the ties between different institutions as to their influence on the processes of accumulation, distribution, and redistribution, and control of finance, aimed at solving environmental problems. The mechanisms of regulating financial processes in ecology and fighting against climate change require additional characteristics.
Green finance, as a tool of redistribution of resources between economic and socio-environmental priorities, determines a very relevant and complex task. According to it, the unsolved issues include the mechanisms of using green finance, assessment of their effectiveness, comparison with alternative methods of solving environmental problems, and alternative methods of investing. The issue of assessing the effectiveness of green finance on the whole, as well as in the context of individual tools, spheres, or sectors, requires in-depth scientific research. The main difficulty with this assessment lies in the subjectivity or informality of most environmental indicators. Apart from this, special attention should be paid to the issue of substantiation of the perspective of regulation and development of the green finance market, which is connected with the change of certain trends of its financing, and the problem of aggravation of the global economic and political uncertainty.
The growth of global uncertainty in modern conditions is closely associated with an entire range of challenges and threats, which form interconnected processes that require a complex approach. In these conditions, the role of green finance as a tool for solving environmental problems and a means for reducing climate-related risks increases. To perform its function, green finance requires institutional support aimed at the achievement of the UN Sustainable Development Goals. Thanks to the phenomenon of impact investing, investors agree to lower the profitability of financial tools to receive non-financial benefits. Green finance functions in the conditions of a complex interaction of financial establishments, international and national institutions, and private economic agents. Their regulatory framework covers around 400 acts and standards, which regulate the entire cycle of green financial operations. In these conditions, rational redistribution of resources is ensured for solving environmental problems, forming trust in green financial tools, and mobilizing additional resources.
It was revealed that green finance is not homogeneous. It covers a range of financial tools, which are different in character, structure, and purpose, and include green bonds, bank loans, investment funds, direct investment, fiscal tools, etc. Analysis of the dynamics of indicators of green financial tools showed a significant increase in the green finance market over the recent decade. The largest volumes of growth were observed in the market of green bonds and loans. The main directions for direct green investment were investments in renewable energy, in particular, hydrogen and solar energy. Together with the positive dynamics of development, we revealed a range of challenges that slow down the growth of green financing markets. These challenges include the reduction in the profitability of sustainable development funds, capital outflow, and insufficient volume of financing for climate measures to achieve the planned level of CO2 emissions by 2030.
The revealed trends of a decrease in the growth rates of green financing markets are combined with the global uncertainty and require reconsideration of regulatory measures, which involve the stimulation of private investments, integration of climate and economic risks, harmonization of standards, and search for ways for additional financing of environmental and climate goals.
The results obtained emphasized the necessity for a search for compromises in the priorities of green finance in developing countries, since the development of green investments in developing countries is connected with social implications (quality of environment, which influences the quality of life, population’s health, and life span), not limited only by economic measurements (e.g., environmental justice, energy access).

6. Conclusions

The key conclusions of this research are as follows:
  • In developed countries, the growth of the activity of green investing in the economy leads to the reduction in almost all environmental costs of GDP: it ensures the reduction in natural resources rents and an increase in GDP per unit of energy use, but does not have a statistically significant effect on the carbon intensity of GDP.
  • Unlike developed countries, in developing countries, growth of the activity of green investing in the economy leads to an increase in almost all environmental costs of GDP, i.e., systemic growth of environmental risks: an increase in total natural resources rents, a decline in GDP per unit of energy use, and growth of carbon intensity of GDP.
  • Unlike developed countries, in which green investments are not determined by the influence of the factors of state regulation, the implementation of the measures of state regulation of green finance—improvement of strength and financial accessibility of legal regulation of administrative disputes, an increase in timeliness of legal regulation of these disputes, and an increase in protection of investors’ property rights—in developing countries ensures an inflow of green investments in the economy.
Policy implications for the reduction in environmental risks through the improvement of state regulation of green finance in developed countries consist of raising the strength and financial accessibility of the legal regulation of administrative disputes by 46.48% and raising its timeliness by 29.65%, as well as improving the protection of investors’ property rights by 23.76%. This allows for increasing the activity of green investments in the economy by 7.55%: from 67.51 points in 2024 to 72.60 points in the long term.
In developing countries, policy implications consist of the improvement of the strength and financial accessibility of the legal regulation of administrative disputes by 104.08%, growth of its timeliness by 121.24%, and improvement of the protection of investors’ property rights by 166.43%. This will allow for reaching the growth of the activity of green investments in the economy by 39.72%: from 60.43 points in 2024 to 84.43 points in the long term.
The practical significance of the results obtained is that the established regularities of the development of green finance under the influence of measures of state regulation in developed and developing countries will raise the precision of forecasting and planning of this development in support of green economic growth and decarbonization.
The economic importance of this paper’s results is explained by the following: the revealed differences between developed and developing countries will allow for forming their own strategies for the development of green finance in each category of countries, given their specifics and, thus, achieving the growth of these strategies’ effectiveness.
Limitations and future research are connected with time limitations (a small horizon of time—data for 2019 compared to 2022–2024 were studied), methodological limitations (the compiled forecasts rely on regression models, due to which they do not have confidence intervals), data restrictions (the choice of control variables is rather narrow—certain factors, for example, industry, regulation intensity, and firm ownership are absent) and limitations of the sample (the sample contains the top 10 countries of the world with the highest level of green economic capabilities in 2024: five developed (Denmark, Finland, Germany, South Korea, and the USA) and five developing (Armenia, China, Malaysia, Russia, and Slovakia) countries.
These limitations do not allow for generalizing the results of this research for the world economy on the whole and other countries (apart from the sample) and other periods (apart from 2019 and 2022–2024). Thus, in future studies, it is advisable to expand the sample and time period, supplement models with the expanded list of control variables, and apply a more complex methodology of forecasting the development of green finance in developed and developing countries. In particular, social measuring and measuring of justice in green finance, especially in the Global South, require isolated research.

Author Contributions

Conceptualization, E.G.P. and A.V.B.; methodology, T.N.L.; formal analysis, E.P.; investigation, E.P.; resources, A.V.B.; data curation, T.N.L.; writing—original draft preparation, E.G.P.; writing—review and editing, A.V.B.; visualization, T.N.L.; supervision, E.P. All authors have read and agreed to the published version of the manuscript.

Funding

This research received no external funding.

Institutional Review Board Statement

Not applicable.

Informed Consent Statement

Not applicable.

Data Availability Statement

The raw data supporting the conclusions of this article will be made available by the authors on request.

Conflicts of Interest

The authors declare no conflict of interest.

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Figure 1. Classification of green financial tools. Source: Compiled by the authors based on (APEC Energy Working Group, 2018; Dziwok & Jäger, 2021; Kantor et al., 2023; C. Liu et al., 2024; Tavares et al., 2024).
Figure 1. Classification of green financial tools. Source: Compiled by the authors based on (APEC Energy Working Group, 2018; Dziwok & Jäger, 2021; Kantor et al., 2023; C. Liu et al., 2024; Tavares et al., 2024).
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Figure 2. Paper’s design (conceptual basis of the research). Source: Calculated and built by the authors.
Figure 2. Paper’s design (conceptual basis of the research). Source: Calculated and built by the authors.
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Figure 3. Correlation between the activity of green investment in the economy and the set of environmental costs of GDP in developed countries. Source: Calculated and built by the authors.
Figure 3. Correlation between the activity of green investment in the economy and the set of environmental costs of GDP in developed countries. Source: Calculated and built by the authors.
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Figure 4. Correlation between the activity of green investment in the economy and the set of factors of state regulation of green finance in developed countries. Source: Calculated and built by the authors.
Figure 4. Correlation between the activity of green investment in the economy and the set of factors of state regulation of green finance in developed countries. Source: Calculated and built by the authors.
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Figure 5. Correlation between the activity of green investment in the economy and the set of environmental costs of GDP in developing countries Source: Calculated and built by the authors.
Figure 5. Correlation between the activity of green investment in the economy and the set of environmental costs of GDP in developing countries Source: Calculated and built by the authors.
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Figure 6. Correlation between the activity of green investment in the economy and the set of factors of state regulation of green finance in developing countries. Source: Calculated and built by the authors.
Figure 6. Correlation between the activity of green investment in the economy and the set of factors of state regulation of green finance in developing countries. Source: Calculated and built by the authors.
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Figure 7. Perspective on reducing environmental risks through the improvement of state regulation of green finance in developed countries. Source: Calculated and built by the authors.
Figure 7. Perspective on reducing environmental risks through the improvement of state regulation of green finance in developed countries. Source: Calculated and built by the authors.
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Figure 8. Perspective on reducing environmental risks through the improvement of state regulation of green finance in developing countries. Source: Calculated and built by the authors.
Figure 8. Perspective on reducing environmental risks through the improvement of state regulation of green finance in developing countries. Source: Calculated and built by the authors.
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Table 1. Green finance in developed and developing countries at different phases of the economic cycle.
Table 1. Green finance in developed and developing countries at different phases of the economic cycle.
Category of CountriesCountryGreen Investment (Score 0–100), GrFn
2019202220232024
Developed countriesDenmark71.0072.7772.7772.77
Finland55.0156.6856.6856.68
Germany68.5069.6769.6769.67
South Korea70.4172.5973.2873.97
United States63.4765.1465.1465.14
Developing countriesArmenia36.0743.0041.8640.72
China56.1959.0659.6559.19
Malaysia53.6858.9963.2765.33
Russia68.2672.0771.1371.13
Slovakia65.7666.2165.0769.79
Source: Compiled by the authors based on the materials of the Global Green Growth Institute (2025).
Table 2. Environmental risks in developed and developing countries at different phases of the economic cycle.
Table 2. Environmental risks in developed and developing countries at different phases of the economic cycle.
Category of CountriesCountryTotal Natural Resources Rents (% of GDP)GDP per Unit of Energy Use (Constant 2021 PPP USD per kg of Oil Equivalent)Carbon Intensity of GDP (kg CO2e per 2021 PPP USD of GDP)
EvCs1EvCs2EvCs3
201920222023202420192022202320242019202220232024
Developed countriesDenmark0.590.450.160.3424.1424.7225.2426.720.080.070.070.06
Finland0.560.370.290.459.459.669.4710.040.140.130.110.10
Germany0.080.090.080.0817.6318.0218.0419.440.130.130.130.11
South Korea0.050.120.110.058.768.928.789.200.270.250.230.22
United States0.600.560.331.2810.3210.9711.0711.170.220.200.200.19
Developing countriesArmenia1.102.202.427.0513.9412.2112.5213.270.130.160.140.13
China1.431.270.861.717.837.777.917.990.450.430.410.41
Malaysia7.336.204.546.9210.8710.7310.6811.190.240.250.250.25
Russia14.4712.217.5918.517.497.336.926.940.350.340.360.35
Slovakia0.290.250.220.2311.8911.9411.6012.510.170.180.170.16
Source: Compiled by the authors based on the materials of the UN (2025).
Table 3. Factors of state regulation of green finance in developed and developing countries at different phases of the economic cycle (worst 0–1 best).
Table 3. Factors of state regulation of green finance in developed and developing countries at different phases of the economic cycle (worst 0–1 best).
Category of CountriesCountryAccess to and Affordability of JusticeTimeliness of Administrative ProceedingsExpropriations Are Lawful and Adequately Compensated
Gvn1Gvn2Gvn3
201920222023202420192022202320242019202220232024
Developed countriesDenmark0.760.780.780.790.880.880.860.870.900.870.850.87
Finland0.700.700.710.710.810.790.810.800.780.810.800.79
Germany0.790.770.760.750.830.850.800.770.910.900.910.91
South Korea0.690.700.700.710.780.800.800.810.780.750.760.77
United States0.440.450.450.480.560.600.580.550.700.710.710.71
Developing countriesArmenian.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.
China0.610.650.660.680.610.580.600.640.390.350.360.38
Malaysia0.580.580.590.580.570.560.550.550.490.490.500.50
Russia0.600.610.620.630.610.580.570.590.380.360.360.35
Slovakia0.600.560.570.620.560.520.500.540.680.660.670.65
n.a.—the data is not available. Source: Compiled by the authors based on the materials of the World Bank (2025a, 2025b, 2025c).
Table 4. General results of regression analysis.
Table 4. General results of regression analysis.
Regression StatisticsDeveloped CountriesDeveloping Countries
Model for EvCs1Model for EvCs2Model for EvCs3Model for EvCs1Model for EvCs2Model for EvCs3
Multiple R0.36110.48260.14140.30780.54880.4397
R-square0.13040.23290.02000.09470.30120.1934
Standard error0.30246.01580.06475.10852.02350.1009
Significance F0.18610.06850.61510.26440.03410.10097
CoefficientsY-intercept1.5149−19.12980.0521−4.240117.3772−0.0045
GrFn−0.01770.50210.00140.1498−0.12040.0045
Regression statisticsModel for GrFn
Multiple R0.30530.8943
R-square0.09320.7998
Standard error6.83415.3663
Significance F0.77160.0004
CoefficientsY-intercept55.664942.1262
Gvn114.17863.4105
Gvn21.787126.5479
Gvn30.972012.3471
The following abbreviations are used in the table: GrFn—Green investment (score 0–100); EvCs1—Total natural resources rents (% of GDP); EvCs2—GDP per unit of energy use (constant 2021 PPP USD per kg of oil equivalent); EvCs3—Carbon intensity of GDP (kg CO2e per 2021 PPP USD of GDP); Gvn1—Access to and affordability of justice (worst 0–1 best); Gvn2—Timeliness of administrative proceedings (worst 0–1 best); Gvn3—Expropriations are lawful and adequately compensated (worst 0–1 best). Source: Compiled by the authors.
Table 5. Cross-correlation of variables in developed countries.
Table 5. Cross-correlation of variables in developed countries.
Cross-CorrelationGreen Investment (Score 0–100)Total Natural Resources Rents (% of GDP)GDP per Unit of Energy Use (Constant 2021 PPP USD per kg of Oil Equivalent)Carbon Intensity of GDP (kg CO2e per 2021 PPP USD of GDP)Access to and Affordability of Justice (Worst 0–1 Best)Timeliness of Administrative Proceedings (Worst 0–1 Best)Expropriations Are Lawful and Adequately Compensated (Worst 0–1 Best)
Green investment (score 0–100)1.00------
Total natural resources rents (% of GDP)−0.361.00-----
GDP per unit of energy use (constant 2021 PPP USD per kg of oil equivalent)0.48−0.141.00----
Carbon intensity of GDP (kg CO2e per 2021 PPP USD of GDP)0.140.03−0.761.00---
Access to and affordability of justice (worst 0–1 best)0.31−0.610.53−0.571.00--
Timeliness of administrative proceedings (worst 0–1 best)0.30−0.640.48−0.530.971.00-
Expropriations are lawful and adequately compensated (worst 0–1 best)0.25−0.490.73−0.720.830.721.00
Source: Compiled by the authors.
Table 6. Cross-correlation of variables in developing countries.
Table 6. Cross-correlation of variables in developing countries.
Cross-CorrelationGreen Investment (Score 0–100)Total Natural Resources Rents (% of GDP)GDP per Unit of Energy Use (Constant 2021 PPP USD per kg of Oil Equivalent)Carbon Intensity of GDP (kg CO2e per 2021 PPP USD of GDP)Access to and Affordability of Justice (Worst 0–1 Best)Timeliness of Administrative Proceedings (Worst 0–1 Best)Expropriations Are Lawful and Adequately Compensated (Worst 0–1 Best)
Green investment (score 0–100)1.00------
Total natural resources rents (% of GDP)0.311.00-----
GDP per unit of energy use (constant 2021 PPP USD per kg of oil equivalent)−0.55−0.451.00----
Carbon intensity of GDP (kg CO2e per 2021 PPP USD of GDP)0.440.24−0.941.00---
Access to and affordability of justice (worst 0–1 best)0.880.09−0.640.671.00--
Timeliness of administrative proceedings (worst 0–1 best)0.880.13−0.650.681.001.00-
Expropriations are lawful and adequately compensated (worst 0–1 best)0.80−0.17−0.100.120.810.791.00
Source: Compiled by the authors.
Table 7. Comparison of the results obtained and the past literature.
Table 7. Comparison of the results obtained and the past literature.
Research ObjectDescription in the Past LiteratureIn Developed CountriesIn Developing Countries
Connection with Green Investment
(Regression)
Change in the Connection Due to Instability
(Correlation)
Connection with Green Investment
(Regression)
Change in the Connection Due to Instability (Correlation)
Consequences for the environmental costs of GDP (environmental risks of the economy)Natural resources rentAl-Rawashdeh et al. (2025)Positive
(−0.0177)
Almost unchangeable
(−0.49 in 2019; −0.42 in 2024)
Negative (0.1498)Almost unchangeable
(0.36 in 2019; −0.51 in 2024)
Energy intensityAzimi et al. (2025)Positive (0.5021)Deterioration (0.54 in 2019; 0.45 in 2024) Negative
(−0.1204)
Almost unchangeable
(0.09 in 2019; −0.67 in 2024)
Carbon emissionsLu et al. (2025)The F-test was not passedAlmost unchangeable (0.04 in 2019; 0.19 in 2024)Negative (0.0045)Almost unchangeable
(0.20 in 2019; 0.30 in 2024)
Dependence on the factors of state regulation of green financeStrength and financial accessibility of legal regulation of administrative disputesH. Li et al. (2025)The F-test was not passedAlmost unchangeable (0.30 in 2019; 0.31 in 2024)Positive (3.4105)Deterioration (0.46 in 2019; 0.18 in 2024)
Its timelinessSusan and Pan (2024)The F-test was not passedImprovement
(0.25 in 2019; 0.29 in 2024)
Positive (26.5479)Deterioration
(−0.67 in 2019; −0.48 in 2024)
Protection of investors’ property rightsZ. Wang et al. (2025)The F-test was not passedDeterioration
(0.50 in 2019; 0.32 in 2024)
Positive (12.3471)Deterioration
(0.43 in 2019; 0.40 in 2024)
Source: Developed and compiled by the authors.
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Popkova, E.G.; Litvinova, T.N.; Petrenko, E.; Bogoviz, A.V. Regulating Green Finance and Managing Environmental Risks in the Conditions of Global Uncertainty. J. Risk Financial Manag. 2025, 18, 552. https://doi.org/10.3390/jrfm18100552

AMA Style

Popkova EG, Litvinova TN, Petrenko E, Bogoviz AV. Regulating Green Finance and Managing Environmental Risks in the Conditions of Global Uncertainty. Journal of Risk and Financial Management. 2025; 18(10):552. https://doi.org/10.3390/jrfm18100552

Chicago/Turabian Style

Popkova, Elena G., Tatiana N. Litvinova, Elena Petrenko, and Aleksei V. Bogoviz. 2025. "Regulating Green Finance and Managing Environmental Risks in the Conditions of Global Uncertainty" Journal of Risk and Financial Management 18, no. 10: 552. https://doi.org/10.3390/jrfm18100552

APA Style

Popkova, E. G., Litvinova, T. N., Petrenko, E., & Bogoviz, A. V. (2025). Regulating Green Finance and Managing Environmental Risks in the Conditions of Global Uncertainty. Journal of Risk and Financial Management, 18(10), 552. https://doi.org/10.3390/jrfm18100552

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