Green financing, pollution, and economic growth: a correlational analysis

Abstract
The rapid economic growth of a country like China is leading to an increase in energy
consumption. The fight against pollution and the pursuit of economic expansion are always
incompatible goals. Green funding is one approach that successfully tackles this problem. In
order to investigate the geographical effects and interaction among green finance,
contaminants, the the growth of the economy, this study uses information gathered in China
to construct a spatial simultaneous equation. It goes on to examine the possibility that all of
these variables are internal. Here is what the empirical results show: Green finance has an
advantageous effect on the growth of the economy, thereby leading to more investments in
environmentally conscious finance. As environmental issues emission levels increase, more
spending with green finance is needed. Green support does have an influence on pollution
emission levels in terms of administration. The correlation between GDP growth and
pollutant emissions is inverted shaped like a and academics call it a financial knowledge
curve (FKC).

Keywords
Introduction
Several industries' economic operations froze or halted production after the Corona illness
epidemic in 2020, which began at the tail end of 2019 and spread like wildfire. It is the belief
of several experts (e.g., Werikhe, 2022; Zakari et al., 2022; Smol, 2022; Feng et al., 2022)
that environmental concerns may be brought up alongside the commencement of economic
activity by businesses and companies. A green revival of the global economy (Galanakis et
al., 2022) and an appropriate means by which nations might achieve sustainable development
objectives would characterise such a scenario. In addition to a carbon-free economy, green
economic recovery may bring about green culture, modernity, globalisation, job
development, and a decrease in environmental problems including drought, global warming,
ozone depletion, and melting polar ice caps. However, the energy transition—the shift from
fossil fuels to green fuels—will be developed and the global economy's reliance on non-
renewable energy consumption will be decreased if nations are pushed to adopt the idea of
green economic recovery. Green economic recovery that reduces economies' reliance on
fossil fuels will bring about peace and tranquilly, which is a humanitarian outcome, if we
think of non-renewable energies, primarily crude oil, as the source of economic crises (oil
shocks), political tensions, and even wars among nations worldwide (Li et al., 2020;
Johnstone and McLeish, 2020).
In spite of all the good that would come out of a green economic recovery, the most
significant obstacle will be getting enough money to fund green initiatives. There is a lack of
interest from private investors in green initiatives because of their poor profitability and
lengthy return periods. A critical challenge is the inadequacy of funding to build a variety of
green projects, which is particularly true for governments in developing nations that lack the
resources to fully fund all of their economic initiatives. During the Corona period, this
problem grew quite serious. Since the government's spending on healthcare and treatment
soared while their capital shrank substantially. Consequently, emerging and eco-conscious
nations must find a way to make up for these shortcomings. Using green finance methods is
one of the most important and cutting-edge strategies to fix this (Bhatnagar and Sharma,
2022). A strategy that may help poor nations invest in green projects with less risk and more
efficiency is green finance. Investors from the private sector are drawn to green initiatives
due to this benefit (Taghizadeh-Hesary and Yoshino, 2019). Consequently, green project
engines will run more efficiently when the private sector is involved.
If we want to increase resource efficiency, green funding is the way to go. The most
significant issue that human cultures have faced due to inefficient resource usage in recent
decades is the planet's resource depletion (Kedir and Hall, 2021). Walden (2020) and
Bhagaloo et al. (2022) point out that there has been a clear pattern of abuse in the exploitation
of these resources over the last several decades, and that their use is not efficient. The same is
true for subsurface resources and freshwater. Resource efficiency has the potential to enhance
industrial methods and innovations, decrease energy intensity, lessen emissions of
greenhouse gases, create jobs, and preserve the planet's ecosystem. It would be feasible to get
the aforesaid benefits by using green finance strategies and enhancing resource efficiency.
However, there is a positive and statistically significant correlation between green economic
growth and green funding. Investment in environmentally friendly projects will rise thanks to
the green finance mechanism, leading to green economic development that is not already
present. Jobs, more welfare, green technology-based economic structures, and fewer air
pollution-related fatalities are all attainable goals of green project execution. Green economic
growth and sustainable development are now within reach, thanks to the brightening of the
economic outlook brought about by advances in renewable energy. According to Huang et
al., 2022a, and 2022b, nations that are concerned about the environment may benefit from
green financing, which can help advance green innovation. Modernization, reduced energy
intensity, and green technology are the results of green innovation. By supporting
environmentally friendly initiatives, green financing may boost green development drivers in
low-income nations, according to Zhang et al. (2022). Economic sectors including electricity
generation, transportation, and the residential sector may all benefit from green growth
drivers' ability to build green infrastructures, which in turn can create green features.
 This work makes a significant contribution in three areas: To begin with, this piece
takes into account not only the components that affect green finance, environmental
contamination, and economic growth, but also how these three interact with one
another. As a second point, there may be geographical implications among green
financing, environmental pollution, and China's economic growth; nevertheless, most
current research on this topic relies on panel models or dynamic panel simultaneous
equations. Using spatial simultaneous equations, this paper will thoroughly examine
the endogeneity issues brought about by the interaction, and then make more robust
findings and provide more thorough recommendations by taking all three factors into
account spatially. Thirdly, there is a dearth of literature on general and household
pollution, with the majority of studies concentrating on industrial pollution. This
paper uses sulphur dioxide, COD, smoke, and dust emission data as environmental
pollution indicators. The total pollution is split into industrial pollution and life
pollution, and each of these is examined independently to examine the impact of
green finance on governance. In two respects, this article is lacking. To start, we think
 our conclusion is unaffected by the fact that the relevant data in China was only
updated till 2022. Even if things are different now than they were before, the change
is not major. The results obtained are still quite useful as a benchmark. We look
forward to doing more research on emerging patterns in green financing,
environmental contamination, and China's economic growth whenever the data is
updated. Second, while there are several ways to quantify green finance, the one
utilised in this article—the overall investment in pollution control—is just one of
them. As an additional indicator for assessing green finance, we will think about
creating a green finance development indicator that incorporates green investment,
green bonds, green insurance, and green credit in future studies.
……………………..

Literature review and hypothesis development

Many parts of green funding, including its features and efficacy, have been the subject of
substantial research. The beneficial effect of green finance instruments for green economic
development has been shown in several prior research. In their study conducted after
COVID-19, Zhao et al. (2022) shown that green bond financing policies have a favourable
effect in the green economic recovery. In a different research, Wang et al. (2022) highlighted
the importance of green finance tools as catalysts for long-term economic development and
progress, even in nations without the necessary funds to support such initiatives. Green
financing, according to Zhang et al. (2022), may boost employment and GDP per capita by
funding eco-friendly initiatives. According to Jiakui et al. (2023), green finance techniques
have the potential to speed up green technical innovation, which in turn might increase green
total factor productivity and green economic development.
First, there's the body of research that has shown the efficacy of funding mechanisms in
achieving sustainable development and energy transition objectives. As an example, a
collection of Asian countries was studied by Khan et al. (2022) to see how effective green
financing is. They discovered that green financing helps cut down on carbon emissions.
Researchers Peng and Xiong (2022) looked at how effective China's green finance
programme was. This paper's findings demonstrated that this approach is suitable for
boosting environmentally friendly initiatives in China. Globally, Mamun et al. (2022)
investigated green financing's efficacy. Key findings showed that the green financing sector
was successful both immediately and over the long term. Connecting green finance
techniques to various economic indicators was the emphasis of the second group. To illustrate
the point, Wang et al. (2022) sought to determine how effective green financing is in
fostering sustainable development. Green financing may have an effect on development
goals, but the statistically significant findings did not prove it. Green bond market
inefficiency stems from low volatility resilience, according to Liu (2022). In order to make
the green financing system more resilient, countries should strengthen its legal and market
mechanisms. Adekoya et al. (2021) examined the US market to determine how efficient
green financing is. They discovered that the green bond market was inefficient because of the
increased volatility it exhibited. Research on Hong Kong's green finance system was
conducted by Ng (2018). The paper's findings suggest that equitable policies and market-
based procedures are necessary for a more effective green finance system. A study conducted
by Ruiz and Botero (2016) examined the effectiveness of Colombia's green finance scheme.
They came to the conclusion that the current system is ineffective and that the government
should implement different regulations to encourage private sector involvement in the green
finance market.

The second body of research examines how green finance instruments interact with a variety
of different factors. According to Sun et al. (2022), the prior study in this area focused on the
connections between green economic development, resource efficiency, and green financing.
Desalegn and Tangl (2022) surveyed the literature on the effects of green financing on
environmentally conscious and socially equitable economic development. The main findings
provided further evidence that green financing may help advance environmentally conscious
economic expansion. According to Huang et al. (2022a), 2022b), green fiancé has the
potential to boost green economic development by attracting more environmentally conscious
consumers and businesses. This conclusion was supported for the BRICS economies by
Mngumi et al. (2022), who used a panel quantile regression technique to examine yearly data
for these nations from 2005 to 2019. The research by Zhou et al. (2022) showed that green
fiancé promoted fintech innovation, which in turn increased the pace of green economic
development. The ability of green financing to upgrade the industrial structure raises the
production potential of a country's industrial sector, which in turn leads to a higher green
economic growth rate, according to Wang and Wang (2021), the leading cause of the positive
impact of green financing on green economic growth. Green financing has the potential to
significantly boost both economic growth and environmental quality, according to research
by Zhou et al. (2020) that concentrated on China's provinces.
Liu et al. (2022) examined the E7 economies' statistics in relation to resource efficiency.
They learned that green financing may boost FinTech initiatives, which in turn lead to
efficiency gains in energy use and financial inclusion. Green financing's effects on energy
efficiency in different parts of China were investigated by Wang and Wang (2022) using the
Tobit model. Green technology advancement finance has a good effect on energy efficiency
levels, according to the main results. Green financing and China's rich resource endowment
were investigated by Wang et al. (2022). Between green financing and ecological efficiency,
they discovered a U-shaped inverted relationship. Nonetheless, our results are consistent with
those of Zhou and Xu (2022), who found, for the Chinese scenario, an inverted U-shaped
association between green funding and ecological progress.
First, green financing has the potential to encourage economic growth, as illustrated in Figure
1. This is the most obvious manifestation of the connection between green financing and
economic development. As a means of guiding market capital flow, green finance optimises
resource allocation to ensure high-quality economic development that does not negatively
impact the environment. This is achieved through promoting technological innovation, the
attainment of economic growth objectives through the optimization and renovation of
business structure, leading to an improvement in total factor production efficiency. Secondly,
ecologically conscious funding might be more encouraged in industrialized nations. As the
state of prosperity keeps getting better, green initiatives and industries will attract more
opportunities for growth. In addition to bolstering the robust growth of green finance, they
will encourage the prudent and effective use of designated money for ecological environment
conservation.
H1: Green financing and economic growth are complementary to one another.
In line with the environmental Kuznets theory, environmental quality has a tendency of first
declining before improving with the robust expansion of the economy. The short-term effect
of investing in green environmental protection is to reduce financial support for polluting
businesses, which will slow their growth. Economic development will be affected by
environmental governance, which means it will slow down. Green finance has helped the
green environmental protection sector financially and opened up new channels of business
financing in the long term. Investment in environmental protection has a substantial
beneficial impact on economic development, and there are circumstances in which the
relationship betwixt credit and the situation may create a impeccable rhythm. Businesses'
bottom lines will see a dramatic improvement if environmental protection monies are put to
good use. The environmental Kuznets theory has come true, thanks to green financing, which
is driving efforts to enhance both economic development and environmental quality. Hence,
we suggest the following presumptions:
H2: The environmental Kuznets theory predicts that as green financing expands, pollution
levels would rise.
There are two angles from which to view the effect of green money on pollution in the
environment. On the one hand, green environmental protection funds encourage energy-
intensive businesses that pollute the environment to speed up their transition to cleaner
practices, prioritise environmental concerns in their investment and management decisions,
and ultimately cut back on their pollution and energy consumption. Conversely, when
pollutant emissions are high and environmental quality is low, the government responds by
implementing environmental control measures and increasing funding for green
environmental protection. This, in turn, forces the improvement of light-green credit to some
degree, and the development of green finance is promoted by increased government
investment in environmental protection.
H3: Both green financing and the need to improve environmental quality serve to push back
against environmental damage.

Fig. 1. The The green lending process, economic growth, and contamination
3. Data sources and the development of the model

Section 3.1: Analysing data and selecting attributes

Sources used for this article's statistics include the Wind, the China Statistical Year book, and
the Statistical Yearbooks of Provinces, Cities, and Municipalities. This article uses data from
2002 to 2022 as the most recent environmental contamination statistics are only available up
to 2022.
We choose the following variables needed for empirical study based on what is available and
what is reflective of the data and literature that already exists.
first, variables that rely on other variables
Due to varying understandings of "green finance," consensus on any one set of indicators has
been difficult to achieve. Based on the work of Mao (2013) [30] and Wei (20 23) [3], we
substitute the amount spent on polluting abatement for green finance. Total investments in
pollution control include urban infrastructure for the environment, the control of historic
pollutant resources, and an ecological security budget of the "Three Synchronous"
construction project. Businesses' ecological bonds & commercial banks' sustainable loans are
the main greener financial products that help with conservation of energy, emission
reduction, and environmental enhancement. This article chooses to measure green lending in
terms of per person green investment instead of the overall amount since this method more
closely matches genuine development; One indicator of contamination of the environment is
the discharge of pollutants per capita. The following are substances that have been found in
EP: rISO2, rLSO2, rSO2, rICOD, rLCOD, rCOD, rISD, rLSD, and rSD. All sulfur dioxide
emissions (industrial, daily, and total), CO2 demand, smoke and dust greenhouse gases, and
demands for chemical oxygen are computed on a per capita basis; gross domestic product is
used to measure the growth in the economy. An nation's financial fulfillment and the income
position of its residents are measured by per capita GDP, which may provide an improved
view of the normal rate of economic growth.
Since investments in environmental preservation are considered a public expenditure in the
green finance equation, their marginal cost could go down or stay the same. Consequently,
there might not be much of an increase in investments in such places where the population
density is high (Yin and Xu (2011)).More investment in environmental protection is possible
in regions with greater per capita fiscal income levels since these monies are more reliably
spent (Zhang, Wang and Zhou (2016) [31]); A perverse correlativity "substitution effect" on
environmental investments financing would result from the fact that education spending takes
up a certain portion of public expenditure.
An rise in the tertiary sector's share in the economy leads to a decline in pollution levels
since, according to the pollution equation, this sector's growth is less polluting than that of the
primary and secondary sectors (Huang, 2010); The "uncertainty hypothesis," FDI has been
the subject of three competing hypotheses, two of which are the "the degradation nirvana
hypothesis" and the "our waste halo hypothesis." Different studies have come to different
conclusions: There is some evidence that foreign direct investment (FDI) has a positive
impact on emissions (Zhang 2016 [31]), but there is also some evidence that FDI has adverse
effects on the environment (Ding and Li 2012 [32]). Research and development (R&D) can
lead to advancements in technology and creativity, that can in turn reduce pollution levels
and may even have a dampening effect on pollutants in the environment (Wei and Pan
(2016)).
Social capital, physical assets, and labor input all hold a favorable ramifications for the
economy (Huang, Chen, 2011; Yang, Wu, and Zhang, who is 2004; Huang and Lin, the year
2013).

Table 1.Relativity in theory among Variable.

Dependent Independent Specific indicators Impact

variable variable direction
Green finance Shear of the ln (Yearly municipality Shear of the -Ve
populace populace by area)
In terms of per (those in the expenditure for each +Ve
capita individual for every area)
municipality
spending
Educational ln (Location educational spending) -Ve
expenses
Social Magnitude of Valuation of higher learning sector -Ve
pollution tertiary industry output relative to the GDP of the area
Overseas (Factual utilization of regional overseas Indeterminac
Straightforward straightforward expenditure) y
Finance
Explore and ln (Outlay on location unscientific -Ve
development explore and enquiry development funds)
expenditure
Shear of the In (Yearly municipality Shear of the +Ve
populace populace by area)
Economic Human capital (Number of individuals with a primary +Ve
growth stock school education or higher multiplied
by the year of education) divided by the
total number of individuals aged six or
older
Stocks of The aggregate value of immovable +Ve
tangible assets assets
Feedback from (Regional employment totals) +Ve
workers
3.2. Analytical indicators of dependence
In China, the overall amount of money put into prevention of pollution through green
financing has been on the rise, especially since 2010.
The whole degree of sulfur dioxide, smoke, dust, and chemical oxygen requirements that
China emits between 2010 and 2022. Inorganic oxygen consumption and particle pollutants
were relatively stable between in 2003 and 2008, however sulfur dioxide emissions rose
across the board. Emissions of all three categories declined between 2005 and 2010,
respectively. There was a sharp decline in the need for sulfur dioxide and oxygen chemical
following 2015, with an especially sharp decline in 2021.

3.3. Approach to evaluation and configuration of the model

3.3.1. Matrices for spatially weights

The foundation of positional measurement in order a spatial scale of weights can be used to
ascertain wether and to how far persons are affected by where they are physically. In most
cases, a square will do for the spatial weight matrix. The spatial connection Wpq represents
weather in the p-th rows and q-th panel of the dimensions array W, which is calculated as
m*m (if m is the total quantity of spatial individuals example). A greater spacial link between
individuals p and q is shown by an increasing effect of one-on-one q on man-to-man p as the
Wpq value increases. Have no spatial effects upon each other when their main vertical
element is zero, meaning that both p and q have the same value, Wpq = 0.
For spatial weighting items, when p = 1, q = 1
WY 11 =ω 11 Y 11 +ω 12 Y 21+ …+ω 1m Y m 1=0 ∗ Y 11 +ω 12 Y 21+ …+ω 1 m Y m 1

Constructing a geographical autonomous equation allows one to ascertain the outcome of a

nonlinear arrangement of additional (n-1) parameters Y onto the initial subject at time period
t = 1. When both p and t are equal to 1, this equation becomes valid. The θ impact coefficient,
which accounts for all p + t values, indicates the stage to which the specific uncertain Y is
influenced aside the area around it the parameter Y.
A province is considered to have one border if it is contiguous to another, and zero if it is not.
In positional weighted matrices, these are the standard ways that component parts are
defined. Additionally, at that place is a array that view both spatial as monetary miles. As
simultaneously a query item and a matrix element, the geographical distance between places
is selected for this investigation.
1
, p≠q
W pq ={ dist ( xp , xj )
0 , p=q
The component in question is the distance in lines (in degrees and minutes) between the
capitals of two distinct regions (p and q, etc), calculated in degrees and minutes and seconds.
A spatial a matrix of weight Wd2, a reverse of the area of the round, is additionally built in
this article so that a robustness test can be executed. It is possible that this matrix will
increase the striking of near regions on the surrounding part and decrease the impinging of
farther away region.
1
, p≠q
MatrixElement W pq={ dist ( xp , xq ) ¿ 2 (1)
0 , p=q
3.3.2. Endogenous test
When asked how to determine if variables are endogeneous, MacKinnon and Davidson
(1993) proposed one. They proposed estimating with the least square method or an
instrumental variable approach and comparing the results. For non-endogenous variables, the
two approaches' estimation findings are identical; nonetheless, for endogenous variables, the
instrumental factor method's predicted outcomes retain consistency., though the regular least-
squares estimation approach did not get such outcomes in its estimations. When combined
with fixed effect regression, these two approaches provide equivalent results. This means that
the estimate results from the two methods will diverge greatly.
Without considering the nonzero shape and spatial influence, an exogenous test is run for
sustainable financing, contamination of the environment, and economic development. Simple
form of the equation:
rEG pt =a1 +δ 1 r EP pt +δ 2 r GF pt + X 1 pt φ1 +ξ 1 p+ τ 1 t +e 1 pt (2)
rEP pt =a2 + δ 3 r EG pt + δ 4 r GF pt + X 2 pt φ2+ ξ 2 p + τ 2 t +e 2 pt (3)
r GF pt =a3 +δ 5 r EG pt +δ 6 r EP pt + X 3 pt φ3 +ξ 3 p +τ 3 t + e3 pt (4)
It is assumed in this equation as and is an integrated element. It was determined that and
served as a means variable in an internal test, since equation (3) assumes as and is a variable
that originates and Equation (4) is a comparable one.

3.3.3. Spatial autocorrelation test

We begin by conducting a test to see whether the primary variables are associated with one
another through autocorrelation across A geographic hysteresis analysis would be suitable
under these circumstances; otherwise, a basic econometric model would do. The following is
a chemical structure of for calculating the Moran index, which is frequently used in this
exam:

m m
m ∑ ∑ ω pq ( Xp − x́ ) ( Xq − x́ )
p =1 q=1
L= m m m (5)
∑ ∑ ω pq ∑ ( Xp − x́ ) 2

p =1 q=1 p=1

Here, L is the Moran the index, M is the number of examples, or Xp and Xq are the matrix
elements that correspond the discovered belief of the self-correlation changeable of sections o
or the components q, respectfully. This is the mean numerical quantity of the uncertain X that
has been measured. The possible values of the Moran index range from -1 to 1.

3.3.4. Identifiable inspection

It is necessary to test the identifiability of the geographic equations that are simultaneous
following their creation before they may be estimated. Since it is difficult to verify the "rank
condition," we switch to monitoring the "ranked criteria" appropriately. The equivalence tin
exist located in the thought contemporaneous equivalence after the a "system criteria" is met.
The equation is said to be overidentified if the total number for external factors (M) is greater
than the number in indigenous variable independence (N); to be distinct if M is less than N;
and to be exactly identifiable if M = N. Here is the particular approach to discrimination.

3.3.5. A framework for solving spatially concurrent equations.

The dependent changeable and multiple variables that are independent make up a parameter-
centric model known as an independent formula for only causal relationships. Still, large real-
world financial procedures frequently display bidirectional causal linkages, and parallel
equation models are the only means of attempting to accurately portray the full interaction
effects of variables. Data sources such as historical and longitudinal research are insufficient
for studying real economic events due to their lack of comprehensiveness and the scope of
detail they provide. The economies of nearby regions will influence one another,in
accordance with the model of spatial simultaneous equations. The outcome might be good or
bad. Despite its foundation in multiple regression analysis, this model accounts for
geographical autocorrelation.
There may be regional implications for choices, funds, and spillovers as a result of the
interconnectedness of sustainable funding, business expansion, contamination to the
environment. Based on this, we extract the subsequent spatial simultaneous equations from
the aforementioned literature, namely Zhang's (2016) work [31]:
rEG pt =a1 +δ 1 r EP pt + δ 2 r GF pt + ρ1 Wr EG pt + X 1 pt φ1+ ξ 1 p + τ 1 t +e 1 pt
{ rEP pt =a2+ δ 3 r EG pt + δ 4 r EG 2pt + δ 5 r GF pt + ρ2 W rEP pt + X 2 pt φ2 +ξ 2 p +τ 2 t + e2 pt (6)
r GF pt =a3 +δ 6 r EG pt + δ 7 r EP pt + ρ3 Wr GF pt + X 3 pt φ3 + ξ3 p + τ 3t +e 3 pt

It is possible to express green finance as environmentally conscious investment per capita,

environmental pollution as emission of pollutants per per capita, and economic growth as the
value of GDP per capita, presuming that t is the current year and p is the entire region.
Everything in the p-th row as q-th line of the physical matrix of weights W, H, which stands
for the geographical connection that exists between p-th and q-th spacial people, is
represented as Wpq. In the three equations given, a represents the external control
inconsistent an indicates the stable term, δ and φ serve as the coefficients for regression, τ and
φ are the time influence where personal effect, and e is the influence term. To find out if the
EKC phenomenon is real, we plug the following into the contemporaneous equations: and is
the neighborhood's per capita GDP weighted by space and, and, are the same.
4. An empirical examination of the connection among green funding, contaminants, &
economic growth

4.1. The term endogenously outcome of test explanation

Results show that "per capita green finance investment and per capita sulphur dioxide
emissions are endogenous variables of per capita GDP" with a 99 percent chance, and a test
statistic of 11.87465 in the economic evolution equation. We can see that the null hypothesis
is rejected in both the sulphur oxide impurity equality and the greenish credit equality.
Table 2. Validation of endogenous variables for rGDP, rSO2, and rGF.
Equalization Depedent Endogenously Statistics Inspection
Variable Independent Variable outcomes
Formula for the rGDP rGF、rSO2 11.86464** Reject
monetary growth of *
a nation
Sulfur dioxide rSO2 rGDP、rGF 8.62448*** Reject
pollution equation
Sustainable rGF rGDP、rSO2 6.24626*** Reject
financing formula

Similarly, at the 1% level of significance, all of the test findings (refer to Tables 3 and 4) may
be used to reject the initial hypothesis. In other words, CO2 demand, smog, and dust are all
examples of endogenous factors that could interact with green funding and economic growth.
Table 3.Examining the endogenous nature of rGDP, rCOD, and rGF.
Equalization Depedent Endogenously Statistics Inspection
Variable Independent Variable outcomes
Formula for the rGDP rGF、rCOD 12.22644** Reject
monetary growth *
of a nation
COD pollution rCOD rGDP、rGF 11.82466** Reject
equation *
Sustainable rGF rGDP、rCOD 6.28646*** Reject
financing formula

Table 4.Validation of endogenous variables for rGDP, rSD, and rGF.

Equalization Depedent Endogenously Statistics Inspectio
Variable Independent n
Variable outcomes
Formula for the rGDP rGF、rSD 16.24122** Reject
Equalization Depedent Endogenously Statistics Inspectio
Variable Independent n
Variable outcomes
monetary growth *
of a nation
Smoke and dust rSD rGDP、rGF 8.26206*** Reject
pollution
equation

Hence, we may construct a geographic continuum equation and include endogenous variables
for analysis: green financing, environmental pollution, and economic growth.

5.2. Evaluating the findings of tests for self-correlation in space and for distinguishable
tests

In 2017, there was a high connection between GDP per capita, in preservation of the
environment, and pollutant eject per capita, as demonstrated in Table 5. The significant
growth of the Leger index L2 relative to L lends credence to this.
Table 5 shows the 2017 Mean Index L and L2 of green banking investing, pollutants released
per individual, and GDP per capita.
rGF rSO2 rCOD rSD rGDP
L 0.112*** 0.064*** 0.041*** 0.082*** 0.142***
(4.644) (2.416) (2.246) (2.228) (4.628)
L2 0.242*** 0.242*** 0.242*** 0.242*** 0.282***
(4.028) (2.442) (2.618 (2.812) (4.622)

The geographical simultaneous equation reveals that out of the three equations (economic
evolution, environmental pollution, and green finance investment), the exogenous factors
outnumber the endogenous ones. All three equations satisfy the recognisable test
requirements and are overidentified.
4.3. Analysis outcomes from spatiotemporal simultaneous equations

When looking at how pollution affects green finance, there is no correlation between the
COD pollution per capita and green finance the investment per capita, but there is a positive
correlation between sulfur oxide pollution per capita and particle emission levels per capita.
As GDP per capita increases, there are more resources offered to administration and use,
which in turn affects environmentally friendly finance. Meanwhile, green finance initiatives
are receiving increasing funding to improve the state of the environment, which is a response
to the rising demand for material items caused by people's quest of happiness.
When looking at the regional impact of green financing, the area weighing coefficient is
adverse and of statistical significance since local governments often participate in "free rider"
behavior with these funds.

In line with Yin (2011), The ratio of the size of the populace has a negative value, and it
becomes simpler to collect and treat pollutants produced in production and life at greater
densities. The cost of green financial investment to mitigate pollution decreases per capita as
the population grows. The local fiscal spending coefficient is positive, which is in line with
what Zhang et al. (2016) found [31]. A more prosperous area is one in which local
government spending is higher. The effectiveness of pollution control measures will be
directly correlated to the eco-friendliness of the financing used for them. The fact that local
education expenditure has a lower coefficient supports Zhang's (2016) [31] claim that green
monetary development and education expenditures share a substitution influence. If the total
budget stays the same, increasing funding for green finance will inevitably mean less money
for other initiatives.Take a look at Table 6.

Table 6. A sustainable economic model with empirical outcomes.

Depedent Variable rGF
rSO2 rCOD rSD
rEP 0.411*** (4.28) 0.218 (0.82) 0.688*** (6.82)
rGDP 162.2*** (21.88) 186.2*** (26.64) 186.6*** (28.64)
WrGF −0.166*** (−2.26) −0.186*** (−2.22) −0.242*** (−4.02)
lnD −2.686 (−1.01) −2.246 (−0.62) −4.486 (−1.04)
lnF 24.42** (2.62) 46.24*** (2.64) 16.62** (1.62)
lnE −41.26 (−4.86) −42.26*** (−6.46) −24.84*** (−2.28)
_cons 286.2*** (2.68) 426.6*** (4.26) 142.26 (1.24)

As a result, pollutants and prosperity followed the well-known EKC rule, which states that
there is a strong turned Ushape relationship between per capita GDP and expel of sulphur
oxide, COD, smoke, and dust. The relative turning points were 7.84 million yuan, 6.12
million yuan, and 5.45 million yuan. Investing in green finance on a per capita basis has a
negative effect on emissions of sulphur dioxide, smoke dust, and COD; however, the effects
of COD and vapor debris square measure non statistically important. Green financing has a
strong treatment impact on sulphur dioxide but a poor effect on the other two pollutants; the
only coefficient that passes the 5% significance test is that of sulphur dioxide.
Pollution has a diffusive influence on the environment, as seen by the positively-shaped
spatial weighting factors of COD, fume and rubble expel, and per capita sulphur oxide.
The tertiary sector has a negative percentage coefficient and produces negligible amounts of
pollution to the environment. Improving the pollution situation in the environment may be
achieved by increasing the share of tertiary industries. As predicted by the "pollution halo"
theory, FDI's negative coefficient significantly reduces emissions of non-COD pollutants. In
addition to increasing the quantity of green financial investment for pollution control, FDI
may introduce cutting-edge manufacturing technology and management approaches, which in
turn can lower pollution emissions. Economic growth has a technological influence, as
measured by a negative R&D spending and the fact that technical upgrading and innovation
may restrict environmental degradation with major governance implications. This finding is
in line with that of Selden (1994) [34], who found that the emission of three contaminants is
negatively correlated with population density.
Green financing has more of a positive than a negative influence on economic growth, which
is reflective of the overall effect of encouraging economic development. In addition to
reducing pollution in the short term, green financing may spur economic growth and
development by funding innovations in industrial technology and the building of necessary
infrastructure, both of which are important for environmental protection. Environmental
pollution has a detrimental effect on economic growth as seen in Table 7, with sulphur oxide
and fume and debris release having a considerable perverse effect on per capita GDP and
COD having no important influence.
Table 7.A mathematical model for contamination in the environment and its empirical
outcomes.
Depedent Variable rEP
rSO2 rCOD rSD
rGDP 224.6*** (6.12) 62.44*** (6.64) 128.48*** (4,62)
rGF −0.226** (−2.22) −0.061 (−1.02) −0.0206 (−0.26)
rGDP2 −14.86*** (−6.46) −4.082*** (−8.62) −14.82*** (−6.88)
WrEP 1.426*** (6.02) 1.264*** (6.48) 1.228*** (4.01)
T −6.220*** (−4.66) −0.846** (−2.42) −4.288*** (−4.68)
lnFI −42.12*** (−6.04) −2.684 (−1.64) −26.84*** (−4.82)
lnR −24.62*** (−4.86) −16.48*** (−6.46) −22.21*** (−2.28)
lnD −42.46*** (−4.62) −8.842*** (−2.68) −16.28* (−1.68)
_cons 846.24*** (6.48) 84.28** (2.26) 486.4*** (4.86)

Economic development has a geographic coordination impact, as shown by the considerably

positive spatial weighting coefficient of GDP per capita, which pertains to the spatial
consequences of economic growth. Economic growth in one area may spur growth in
neighbouring places, proving that economic development has positive externalities.
Table 8 shows that the TRIO powerfulness unsettled—labor input, real and human primary
commonplace, and economic development—have positive but negligible coefficients that
promote economic growth.
Table 8.Validation of the growth of the economy formula by actual data.
Dependent Variable rGDP
rSO2 rCOD rSD
rGF 0.00628*** (−6.48) 0.00628*** (22.84) 0.00488*** (28.86)
rEP −0.00228*** (−6.04) −0.00204 (−1.42) −0.00466*** (−11.46)
WrGDP 0.148*** (4.22) 0.164*** (4.02) 0.168*** (6.01)
lnL 0.162*** (2.84) 0.264*** (6.22) 0.0462 (1.18)
lnK 0.0648** (2.46) 0.0162 (0.48) 0.0684*** (2.84)
E 0.0442* (1.88) 0.164*** (4.84) 0.0428*** (2.48)
_cons −0.826** (−2.21) −2.286*** (−4.26) −0.268 (−0.26)

5. Extra information form analyses

5.1. Growth in the economy, sustainability, and sustainable funding

While there is a dearth of literature on environmental contamination generally, the vast

majority of studies have concentrated on pollution from industries. Industrial production
emissions were formerly the major cause of air pollution, with the fraction of emissions from
human activities being too little to warrant attention. Nonetheless, emissions of life pollutants
have been on the rise in recent years, making up a larger and larger share of total pollution
and eventually becoming the primary cause of environmental contamination. As a result,
research on life contamination has to be undertaken independently.
Although the findings are generally in line Based on the findings from the overall
contamination measurements, there is a slight difference between the two in terms of the
natural contamination condition presented in Table 9. This table highlights the influence of
green support on contamination. The impact of green money on life and the release of sulphur
dioxide is significant, but the data from Table 6 shows no major government influence on
industrial sulphur dioxide emissions. There is a limited influence on overall aerosol and dust
pollution and no significant impact of discharges, although there is no significant effect on
overall COD emissions from administration.
Table 9. Findings from the formula on contamination of the environment based on actual
information.
Interpret variable rGF
rISO2 rLSO2 rICOD rLCOD rISD rLSD
rGDP 166.8*** 46.26*** 2.026 (0.46) 20.24*** 60.14*** 20.21***
(4.66) (4.64) (4.24) (2.08) (4.02)
 Interpret variable rGF
rGF −0.0214 −0.202*** 0.142*** −0.0402** 0.124 (1.02) 0.0086
(−0.21) (−4.02) (4.04) (−2.26) (0.28)
rGDP −16.22*** −0.244 −2.012*** −0.601** −8.042*** −2.126***
2 (−8.26) (−0.48) (−6.21) (−2.11) (−6.46) (−6.24)
WrEP 1.026*** 1.222*** 0.142 (0.42) 2.142*** 0.121 (1.22) 0.00826
(6.02) (−4.64) (8.26) (0.22)
T −4.224*** −0.242*** −0.212 −0.422 −4.012*** −0.648**
(−4.28) (−6.46) (−2.12) (−1.21) (−4.24) (−2.41)
lnFI −26.44*** −12.12*** −4.224*** 2.422*** −20.46*** −6.24***
(−4.24) (−6.02) (−2.42) (2.12) (−4.02) (−4.48)
lnR −26.68*** −4.264** −1.422 −8.826*** −12.24** −4.022**
(−6.42) (−2.12) (−0.88) (−6.64) (−2.24) (−2.26)
lnD −22.16*** −4.264** −6.242*** 2.021** −12.22** −1.221
(−4.28) (−2.12) (−4.42) (1.86) (−1.82) (−0.64)
_cons 686.64*** 166.64*** 122.22*** −112.2*** 286.42*** 88.42***
(4.24) (4.26) (4.24) (−6.24) (2.84) (6.42)

5.2. Robustness test

Empirical outcomes are affected differently by various configurations of spatial weight
matrices. The spatial weight matrix (Wd2) estimations are tested for robustness in this
research (refer to Tables 10, 11, and 12).
Table 10. The outcomes from testing the resilience of the sustainable finance equations.
Explain Variable rGF
rSO2 rCOD rSD
rEP 0.242*** (2.46) 0.0284 (0.22) 0.462*** (6.02)
rGDP 162.1 (14.26) 148.26*** (14.66) 164.28*** (16.64)
WrGF −0.0648** (−2.04) −0.128** (−2.44) −0.0628* (−1.84)
InD −8.248* (−1.42) −8.284 (−1.42) −8.64 (−1.08)
InF 26.46*** (2.01) 26.64*** (4.26) 18.26 (1.26)
InE −48.84*** (−8.26) −48.26*** (−6.01) −24.46*** (−4.86)
_cons 482.48*** (6.28) 426.46*** (4.62) 282.4** (2.24)

Table 11. Findings from a thorough examination of the formula related to polluting the
environment.
 Explain Variable rEP
rSO2 rCOD rSD
rGDP 264.26*** (10.26) 40.26*** (6.26) 100.26*** (6.26)
rGF −0.244*** (−6.01) −0.0284 (−0.46) −0.0624 (−0.86)
rGDP2 −12.48*** (−4.22) −0.0248 (−0.64) −6.488*** (−4.86)
WrEP 1.284*** (6.46) 1.262*** (4.48) 2.048*** (6.24)
T −6.246*** (6.86) −1.268*** (−4.26) −4.268*** (−4.28)
InFI −28.48*** (−6.84) −2.646 (−0.86) −18.28*** (−6.48)
InR −46.26*** (−8.28) −16.28*** (−8.26) −21.48*** (−6.28)
InD −48.26*** (−4.28) −8.286*** (−4.102) −18.82*** (−8.06)
_cons 466.64*** (4.66) 126.48*** (4.68) 426.68*** (6.04)

Table 12.Findings from an in-depth assessment regarding the growth equation's resilience.
Explain Variable rGDP
rSO2 rCOD rSD
rGF 0.1066*** (2.66) 0.0684** (2.02) 0.0686** (1.88)
rEP −0.00164*** (−6.28) −0.00248* (−1.66) −0.00284*** (−8.28)
WrGDP 0.0684*** (2.88) 0.0846** (2.24) 0.0846** (2.16)
InL 0.204** (2.46) 0.246*** (4.28) 0.0462 (0.24)
InK 0.166*** (4.86) 0.0846 (1.02) 0.142*** (4.26)
E 0.0642** (2.22) 0.162*** (4.88) 0.0628** (2.26)
_cons −1.266*** (2.88) −2.468*** (−8.88) −0.408 (−0.68)

The findings show that the control and core variables of the spatial simultaneous equation are
statistically very close, with constant positive and negative estimation coefficients; this bodes
well for the robustness of the empirical study.

6. Conclusions and advice over activity

6.1. Conclusions
This article examines the geographical impacts of greenish financing, biological science
impureness, and economical growth, along with their linkages. It uses data from 2002 to 2022
throughout China. Here are the key findings:
Green financing, pollution, and economic growth are all intrinsically related. Developed
economies with their sulphur dioxide emissions, CO2 demand, smoke, and dust make up an
inverted U-shaped EKC. Greenish credit has a definite organization issue connected waste
material eject, and there is a positive correlation between economical improvement and green
finance investment. Green finance is necessary to address rising emissions of environmental
pollutants, and per capita emissions of sulphur oxide, smoke, and junk have a substantial
perverse effect on GDP.
Economic growth is stimulated by physical capital, labour, and other similar factors. Better
industrial technology and more effective pollution management may be achieved with more
financing; Environmental pollution control can be made more efficient, green finance
investments can be saved, and per capita pollution emissions can be efficiently reduced with
a reasonable increase in population density; According to the "pollution halo hypothesis," an
uptick in FDI may usher in more eco-conscious industrial techniques and management
practices; The industrial structure can be upgraded and pollution emissions can be greatly
reduced by increasing the share of tertiary industries; Green finance, which aims to enhance
the quality of the local environment, may get more funding if there is an abundance of local
financing.
Life pollution and industrial pollution are the two subsets of overall environmental pollution
that we classify further. When it comes to the living area, green money is quite effective in
reducing pollution, but when it comes to the industrial field, it is ineffective.
6.2. Policy recommendations
Some recommendations for environmentally friendly financing are made based on the
findings of this study and the pertinent national circumstances in China:
At the national level, the government should prioritise the building and improvement of
China's greenish credit method, chart a sensible course its coming growth, encourage banks
to release new green products on a regular basis, and support environmentally conscious
businesses and initiatives with a variety of financial instruments. While social capital invests
in green finance, the government should control their entry into the sector and guarantee their
investment income so that they can safeguard the environment.
Financial institutions: It is imperative that all types of financial institutions fully embrace
green finance, take the lead, and include green development into their strategic plans. Banks
and other financial institutions should build and enhance their risk management and
assessment systems, pay close attention to risk control, and innovate green financial products.
Socially, we need to foster an environment where people are willing to work together to
develop a more sustainable and civilised world, raise awareness about the need of green
consumerism, and reward and promote environmentally conscious businesses and banks who
go above and beyond.