The Implications of Green Finance on Credit Risk in Banking Sector of Pakistan
Abstract
In 21st century the environmental change has turned into a significant issue for organizations as well as investors. Thus, to lessen fossil fuel byproduct, monetary establishments offer green funding to organizations to manage the issue of environmental change. But the real question is how much the risk of financial institutions, especially banks, is impacted by the availability of green financing. Examining how green finance affects Pakistani banks' credit risk is the goal of this study. The study has employed a panel dataset that encompasses green finance data from 2014 to 2020. The findings showed that the credit risk of the banks is significantly impacted by green finance proxies overall. The study's conclusions could have a real-world impact on bank managers, regulators, and lawmakers who want to create green finance laws that will help banks lower their exposure to credit risk. This study fills a gap in the literature on green financing, especially for poor nations, and adds empirical evidence to support its findings.
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