Determinants of climate financing and the moderating effect of politics: evidence from Bangladesh

Abstract

Purpose There was no previous firm-level empirical research to examine cross-sectional differences in climate financing. The purpose of this study is to determine the key elements of the climate investment decision by business management. The study also explores how politics and media influence corporate climate investment decisions. Design/methodology/approach The study incorporates a theoretical lens of institutional, stakeholder and media setting agenda to explain the relationship of climate finance with political connection and media influence along with other institutional and firm-specific variables. The sample of the study is collected from the financial sector firms that financed climate/green projects. In total, 178 firm-year observations are documented during 2014–2018. The unbalanced panel data model uses a fixed effect and a 2SLS regression model to test a set of hypotheses. The study uses several alternate methods to check and verify the reliability of the study. Findings The empirical findings show that climate finance is positively and significantly associated with Islamic Sharīʿah and media visibility, and negatively and significantly related to financial constraints. Moreover, the empirical results document that listing regulation has no significant influence on climate investment. The political connection plays a negative moderating role between media and climate finance. The result indicates that if a former or current politician is on the board, the media’s positive impact on climate financing diminishes. Practical implications The study has significant managerial implications especially to the regulatory bodies, business management and policymakers. The central bank in the developing countries needs to take into consideration the finding of the study promoting climate/environmental/green finance and investment. Islamic Sharīʿah promotes climate finance that would be a prominent indicator for Islamic financial institutions. Social implications Politics can deter positive decisions on climate financing such that it negatively influences the media’s role of a watchdog of the society in developing countries. Climate investment would be an important mechanism to reduce carbon emissions and environmental hazards and to solve many social problems. Originality/value The study provides first-ever firm-level evidence of the determinants of climate finance and investment that has a significant value in the area of climate change and green investment by the financial firms.

Does Corporate Social Responsibility Impact on Corporate Risk-Taking? Evidence from Emerging Economy

“…Enterprises improve their public image by implementing positive environmental protection measures [39]. Climate investment can be an important mechanism to reduce environmental hazards and solve many social problems [12]. CSR fulfillment is conducive to improving corporate reputation.…”

“…With reference to Chen et al [66], Hasan et al [68], Bae et al [12] and Wan-Hussin et al [18], the following panel regression models 1 and 2 are constructed to test hypotheses 1 and 2, respectively. In the control variables, LEV, TAT, GROWTH, NPM, AU-DIT and LnSALARY are taken as the first-order lags to alleviate endogeneity caused by reverse causality.…”

“…Social responsibility is an obligation that organizations should fulfill [11]. Bae et al [12] believed that the central banks in developing countries need to consider promoting environmental finance and investment. However, in the absence of strict institutional constraints in emerging economies, enterprises' understanding of the degree of CSR fulfillment is greatly different from the expectations of policy makers, and the uncertainty of relevant institutions will also bring uncertain CSR fulfillment [13].…”

A longitudinal study of corporate social responsibility expenditure and ownership structure of financial firms

“…Stakeholder engagement and regulatory compliance also influenced CSR expenditure decisions. Firms in developing countries face limited stakeholder pressure, and there is also a lack of regulatory compliance (Bae et al, 2018(Bae et al, , 2021Rashid, 2021;Bose et al, 2020a;Masud et al, , 2018aMasud et al, , 2018bMasud et al, , 2017. In the presence of weak corporate governance, the financial system of emerging countries like Bangladesh has a conflict between shareholders and agents due to the benefits and short-term investment decisions.…”

“…1) the financial sector is the most regulated in the country compared to the non-financial sector (Bae et al, 2021);…”