The effect of green finance on environmental performance: Mediating role of green innovation
DOI:
https://doi.org/10.12928/jombi.v3i1.1379Abstract
Purpose-The purpose of this study is to assess the impact of green finance on environmental performance, using green innovation as a mediating variable. Environmental performance is an important indicator in assessing how companies can reduce negative impacts on the environment through environmentally friendly policies, practices, and innovations. Green finance is a factor that can encourage an improvement in environmental performance by implementing more sustainable business practices.
Methodology-This study's population was private bank employees, with a sample size of 100. It employed a quantitative methodology, utilizing partial least squares structural equation modeling with Smart PLS to investigate the relationships among variables.
Findings-The findings showed a positive relationship between environmental performance and green finance. It was shown, though, that green finance does not positively influence green innovation; conversely, green innovation does have a positive effect on environmental performance. It was also shown that green innovation does not serve as a mediator between green finance and environmental performance.
Research Limitations-This study's limitation is that the number of respondents is still relatively small, so it does not represent all private banking employees in Jawa Tengah, Indonesia. Thus, further studies can involve more respondents or focus on a specific region in Indonesia.
Novelty-It is expected that this research will serve as a reference for banking institutions in the development of policies aimed at sustainable performance. It is anticipated that companies will highlight the significance of green finance in encouraging a more environmentally responsible business context.
References
Abbas, J., Mahmood, S., Ali, H., Raza, M. A., Ali, G., Aman, J., Bano, S., & Nurunnabi, M. (2019). The effects of corporate social responsibility practices and environmental factors through a moderating role of social media marketing on sustainable performance of business firms. Sustainability (Switzerland), 11(12). https://doi.org/10.3390/SU11123434
Aftab, J., Abid, N., Cucari, N., & Savastano, M. (2023). Green human resource management and environmental performance: The role of green innovation and environmental strategy in a developing country. Business Strategy and the Environment, 32(4). https://doi.org/10.1002/bse.3219
Agrawal, R., Agrawal, S., Samadhiya, A., Kumar, A., Luthra, S., & Jain, V. (2024). Adoption of green finance and green innovation for achieving circularity: An exploratory review and future directions. Geoscience Frontiers, 15(4). https://doi.org/10.1016/j.gsf.2023.101669
Akomea-Frimpong, I., Adeabah, D., Ofosu, D., & Tenakwah, E. J. (2022). A review of studies on green finance of banks, research gaps and future directions. Journal of Sustainable Finance and Investment, 12(4). https://doi.org/10.1080/20430795.2020.1870202
Albort-Morant, G., Henseler, J., Leal-Millán, A., & Cepeda-Carrión, G. (2017). Mapping the field: A bibliometric analysis of green innovation. Sustainability (Switzerland), 9(6). https://doi.org/10.3390/su9061011
Albort-Morant, G., Leal-Millán, A., & Cepeda-Carrión, G. (2016). The antecedents of green innovation performance: A model of learning and capabilities. Journal of Business Research, 69(11). https://doi.org/10.1016/j.jbusres.2016.04.052
Albort-Morant, G., Leal-Rodríguez, A. L., & De Marchi, V. (2018). Absorptive capacity and relationship learning mechanisms as complementary drivers of green innovation performance. Journal of Knowledge Management, 22(2). https://doi.org/10.1108/JKM-07-2017-0310
Ardiza, F., Nawangsari, L. C., & Sutawidjaya, A. H. (2021). The influence of green performance appraisal and compensation on improving employee performance through OCBE. International Review of Management and Marketing, 11(4). https://doi.org/10.32479/irmm.11632
Asadi, S., Nilashi, M., Samad, S., Rupani, P. F., Kamyab, H., & Abdullah, R. (2021). A proposed adoption model for green IT in manufacturing industries. Journal of Cleaner Production, 297. https://doi.org/10.1016/j.jclepro.2021.126629
Bakry, W., Mallik, G., Nghiem, X. H., Sinha, A., & Vo, X. V. (2023). Is green finance really “green”? Examining the long-run relationship between green finance, renewable energy, and environmental performance in developing countries. Renewable Energy, 208, 341–355. https://doi.org/10.1016/j.renene.2023.03.020
Carnevale, C., & Mazzuca, M. (2014). Sustainability reporting and varieties of capitalism. Sustainable Development, 22(6). https://doi.org/10.1002/sd.1554
Chen, J., Siddik, A. B., Zheng, G. W., Masukujjaman, M., & Bekhzod, S. (2022). The effect of green banking practices on banks’ environmental performance and green financing: An empirical study. Energies, 15(4). https://doi.org/10.3390/en15041292
Chen, Y., Tang, G., Jin, J., Li, J., & Paillé, P. (2015). Linking market orientation and environmental performance: The influence of environmental strategy, employee’s environmental involvement, and environmental product quality. Journal of Business Ethics, 127(2). https://doi.org/10.1007/s10551-014-2059-1
Dai, X., Siddik, A. B., & Tian, H. (2022). Corporate social responsibility, green finance and environmental performance: Does green innovation matter? Sustainability (Switzerland), 14(20). https://doi.org/10.3390/su142013607
Dong, Z., Xu, H., Zhang, Z., Lyu, Y., Lu, Y., & Duan, H. (2022). Whether green finance improves green innovation of listed companies: Evidence from China. International Journal of Environmental Research and Public Health, 19(17). https://doi.org/10.3390/ijerph191710882
Dubey, R., Gunasekaran, A., & Samar Ali, S. (2015). Exploring the relationship between leadership, operational practices, institutional pressures and environmental performance: A framework for green supply chain. International Journal of Production Economics, 160. https://doi.org/10.1016/j.ijpe.2014.10.001
El-Kassar, A. N., & Singh, S. K. (2019). Green innovation and organizational performance: The influence of big data and the moderating role of management commitment and HR practices. Technological Forecasting and Social Change, 144. https://doi.org/10.1016/j.techfore.2017.12.016
Falcone, P. M., & Sica, E. (2019). Assessing the opportunities and challenges of green finance in Italy: An analysis of the biomass production sector. Sustainability (Switzerland), 11(2). https://doi.org/10.3390/su11020517
Fu, C., Lu, L., & Pirabi, M. (2023). Advancing green finance: A review of sustainable development. Digital Economy and Sustainable Development, 1(1). https://doi.org/10.1007/s44265-023-00020-3
Gallego-Álvarez, I., & Pucheta-Martínez, M. C. (2020). Environmental strategy in the global banking industry within the varieties of capitalism approach: The moderating role of gender diversity and board members with specific skills. Business Strategy and the Environment, 29(2). https://doi.org/10.1002/bse.2368
Guang-Wen, Z., & Siddik, A. B. (2023). The effect of fintech adoption on green finance and environmental performance of banking institutions during the COVID-19 pandemic: The role of green innovation. Environmental Science and Pollution Research, 30(10). https://doi.org/10.1007/s11356-022-23956-z
Guo, Y., & Liang, C. (2016). Blockchain application and outlook in the banking industry. Financial Innovation, 2(1). https://doi.org/10.1186/s40854-016-0034-9
Ha, N. M., Nguyen, P. A., Luan, N. V., & Tam, N. M. (2024). Impact of green innovation on environmental performance and financial performance. Environment, Development and Sustainability, 26(7). https://doi.org/10.1007/s10668-023-03328-4
Hair, J. F., Howard, M. C., & Nitzl, C. (2020). Assessing measurement model quality in PLS-SEM using confirmatory composite analysis. Journal of Business Research, 109. https://doi.org/10.1016/j.jbusres.2019.11.069
Han, B. (2024). Fostering sustainability: Integrating social responsibility, green finance, and corporate performance. Economic Change and Restructuring, 57(2). https://doi.org/10.1007/s10644-024-09656-3
Indriastuti, M., & Chariri, A. (2021). The role of green investment and corporate social responsibility investment on sustainable performance. Cogent Business and Management, 8(1). https://doi.org/10.1080/23311975.2021.1960120
Irfan, M., Razzaq, A., Sharif, A., & Yang, X. (2022). Influence mechanism between green finance and green innovation: Exploring regional policy intervention effects in China. Technological Forecasting and Social Change, 182. https://doi.org/10.1016/j.techfore.2022.121882
Kala, K. N. (2020). A study on the impact of green banking practices on bank’s environmental performance with special reference to Coimbatore City. African Journal of Business and Economic Research, 15.
Khan, P. A., Pritam Singh, S. K. J., Johl, S. K., Shamim, A., Nurhayadi, Y., Wijiharjono, N., & Al-Azizah, U. S. (2021). Injecting green innovation reporting into sustainability reporting. SHS Web of Conferences, 124. https://doi.org/10.1051/shsconf/202112405003
Kuo, Y. K., Khan, T. I., Islam, S. U., Abdullah, F. Z., Pradana, M., & Kaewsaeng-on, R. (2022). Impact of green HRM practices on environmental performance: The mediating role of green innovation. Frontiers in Psychology, 13. https://doi.org/10.3389/fpsyg.2022.916723
Li, X., Wang, S., Lu, X., & Guo, F. (2023). Quantity or quality? The effect of green finance on enterprise green technology innovation. European Journal of Innovation Management. https://doi.org/10.1108/EJIM-03-2023-0208
Lin, B., & Ullah, S. (2023). Towards the goal of going green: Do green growth and innovation matter for environmental sustainability in Pakistan. Energy, 285. https://doi.org/10.1016/j.energy.2023.129263
Liu, J., Jiang, Y., Gan, S., He, L., & Zhang, Q. (2022). Can digital finance promote corporate green innovation? Environmental Science and Pollution Research, 29(24). https://doi.org/10.1007/s11356-022-18667-4
Liu, M., Liu, L., & Feng, A. (2024). The impact of green innovation on corporate performance: An analysis based on substantive and strategic green innovations. Sustainability, 16(6), 2588. https://doi.org/10.3390/su16062588
Pacheco, M. M., & Newell, K. M. (2018). Learning a specific, individual and generalizable coordination function: Evaluating the variability of practice hypothesis in motor learning. Experimental Brain Research, 236(12). https://doi.org/10.1007/s00221-018-5383-3
Seman, N. A. A., Govindan, K., Mardani, A., Zakuan, N., Saman, M. Z. M., Hooker, R. E., & Ozkul, S. (2019). The mediating effect of green innovation on the relationship between green supply chain management and environmental performance. Journal of Cleaner Production, 229. https://doi.org/10.1016/j.jclepro.2019.03.211
Sinha, A., Mishra, S., Sharif, A., & Yarovaya, L. (2021). Does green financing help to improve environmental & social responsibility? Designing SDG framework through advanced quantile modelling. Journal of Environmental Management, 292. https://doi.org/10.1016/j.jenvman.2021.112751
Sule, A. K., Eyo-Udo, N. L., Onukwulu, E. C., Agho, M. O., & Azubuike, C. (2024). Green finance solutions for banking to combat climate change and promote sustainability. Gulf Journal of Advance Business Research, 2(6), 376–410. https://doi.org/10.51594/gjabr.v2i6.54
Tang, M., Walsh, G., Lerner, D., Fitza, M. A., & Li, Q. (2018). Green innovation, managerial concern and firm performance: An empirical study. Business Strategy and the Environment, 27(1). https://doi.org/10.1002/bse.1981
Umar, M., & Safi, A. (2023). Do green finance and innovation matter for environmental protection? A case of OECD economies. Energy Economics, 119. https://doi.org/10.1016/j.eneco.2023.106560
Wang, Q. J., Wang, H. J., & Chang, C. P. (2022). Environmental performance, green finance and green innovation: What’s the long-run relationships among variables? Energy Economics, 110. https://doi.org/10.1016/j.eneco.2022.106004
Wang, X., & Wang, Y. (2021). Research on the green innovation promoted by green credit policies wang. Journal of Management World.
Weng, H. H. R., Chen, J. S., & Chen, P. C. (2015). Effects of green innovation on environmental and corporate performance: A stakeholder perspective. Sustainability (Switzerland), 7(5). https://doi.org/10.3390/su7054997
Xing, C., Zhang, Y., & Wang, Y. (2020). Do banks value green management in China? The perspective of the green credit policy. Finance Research Letters, 35. https://doi.org/10.1016/j.frl.2020.101601
Zhang, X., Wang, Z., Zhong, X., Yang, S., & Siddik, A. B. (2022). Do green banking activities improve the banks’ environmental performance? The mediating effect of green financing. Sustainability (Switzerland), 14(2). https://doi.org/10.3390/su14020989
Zheng, G. W., Siddik, A. B., Masukujjaman, M., & Fatema, N. (2021). Factors affecting the sustainability performance of financial institutions in Bangladesh: The role of green finance. Sustainability (Switzerland), 13(18). https://doi.org/10.3390/su131810165
Zhu, Y., Mottaghi, R., Kolve, E., Lim, J. J., Gupta, A., Fei-Fei, L., & Farhadi, A. (2017). Target-driven visual navigation in indoor scenes using deep reinforcement learning. Proceedings - IEEE International Conference on Robotics and Automation. https://doi.org/10.1109/ICRA.2017.7989381
Downloads
Published
Issue
Section
License
Copyright (c) 2025 Journal of Management and Business Insight
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
Authors who publish with this journal agree to the following terms:
- Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgment of the work's authorship and initial publication in this journal.
- Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgment of its initial publication in this journal.
- Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See The Effect of Open Access).
