Do the climate-related financial policies promote green innovation? Insights from global sample

This paper is an attempt to empirically examine the influences of climate-related financial policies (CRFP) on green innovation (GI). By applying diverse econometric techniques, namely a panel-corrected standard error model (PCSE), feasible generalized least square (FGLS), and two-step general method of moment (the two-step GMMs), to a global sample of 23 European countries in the period from 2012 to 2019, the estimation results demonstrate that the CRFP has a favorable impact and is statistically significant on all four aspects of green innovation implementation. We find robust results by utilizing various econometric techniques and adding more explanatory variables. To shed light on the relationship between CRFP and GI, we demonstrate the short-run and long-run effects of CRFP on GI. The results suggest that climate-related financial policies only significantly negatively affect investments in environmental activities in the short run. Notably, our findings imply that climate-related financial policies are more likely to have long-term impacts than short-term ones. Our findings are critical to suggest policy implications to employ climate policies more effectively to promote the use of green innovation.