Green Finance as a Strategic Tool For Environmental Compliance and Sustainable Competitiveness
DOI:
https://doi.org/10.66811/eijrihs.vol1.no3.49Keywords:
Green finance, environmental compliance, sustainable competitiveness, green bonds, ESG, firms.Abstract
In this paper, the relation between green finance and environmental compliance and sustainable competitiveness of firms is explored. The study was triggered by a high level of interest among firms to meet environmental requirements, while maintaining competitiveness in a market increasingly driven by the climate risk agenda and responsible investment and stakeholder pressure. The paper was based on the NRBV which centres around the notion that pollution prevention, product stewardship and sustainable development capabilities can turn into a source of firm advantage. The study was designed as a documentary and systematic literature review, focusing on empirical and/or policy studies published primarily from 2019 to 2026. The focus was on green finance instruments like green bonds, sustainability linked loans, green credit lines, ESG equity funds, carbon credits and green guarantees. A narrative synthesis and a simple percentage analysis were used for analysing evidence from the literature reviewed. It was found that green finance promotes environmental compliance by providing funding for environmental compliance technologies, pollution monitoring, environmental certification, disclosure systems and regulatory reporting. The results also indicated that green finance contributes to sustainable competitiveness through the reduction of financing constraint, increased green innovation, boosted reputation, increased efficiency and improved access to sustainability sensitive markets. The high transaction cost, poor disclosure capacity, however, is the major constraint, as is also the risk of greenwashing and restricted access to smaller companies. The paper has found that green finance is not only a funding tool, but also a strategic governance instrument connecting environmental compliance and longer-term competitiveness. It called for more regulatory convergence, building green finance capacities at the firm level and credible assessment of the outcomes of green finance.
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