Green bonds and green environment: exploring innovative financing mechanisms for environmental project sustainability

This study delved into the intricate relationships between green bonds (GB), Environmental National Cap (ENC), the European Commission's green growth metrics (EC), and innovative financial mechanisms (INN_FM). Employing the Pesaran CD test, the research underscored significant cross-sectional dependence among the examined countries. The subsequent unit root tests affirmed the first-order integration of variables, causing the panel vector autoregressive (PVAR) approach for deeper insights. The findings indicated that while GB notably influenced the EC's metrics, and its effect on ENC was relatively subdued. Notably, INN_FM appeared to insignificantly influence the issuance of GB. By leveraging variance decomposition, we discerned that the dynamics between these factors, especially in green economic growth, is complex and can vary across regulatory and national contexts. This research provides an essential foundation for policymakers, regulators, and investors to understand the multifaceted interplays in green finance mechanisms and craft strategies to optimize their impact on sustainability outcomes. Hence, the study provides multiple policy implications for the associated stakeholders.