ECONOMIC IMPACT OF GREEN FINANCING MECHANISMS IN THE BANKING SYSTEM
Keywords:
Green finance, green banking, ESG, sustainable development, financial stability, economic growth.Abstract
The increasing urgency of climate change, environmental degradation, and resource scarcity has compelled financial systems worldwide to adopt sustainable development strategies. Within this transformation, the banking sector plays a central role in mobilizing capital toward environmentally responsible investments. Green financing mechanisms integrate environmental, social, and governance (ESG) principles into financial intermediation, directing funds toward renewable energy, energy efficiency, sustainable infrastructure, and pollution control projects while mitigating climate-related financial risks. This article provides a comprehensive assessment of green financing mechanisms in banking and evaluates their economic impact on financial stability, technological innovation, and macroeconomic growth. Drawing upon recent theoretical and empirical studies, the paper demonstrates that green finance contributes significantly to sustainable economic development, enhances bank performance, promotes green innovation, and strengthens financial resilience. At the same time, persistent challenges, including greenwashing, regulatory fragmentation, and information asymmetry, hinder the effectiveness of green financial systems. The study concludes by emphasizing the importance of robust regulatory frameworks, digital transformation, and policy coordination to ensure the long-term success of green finance initiatives.
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