Impediments of Green Finance Adoption System: Linking Economy and Environment

Kanwal Iqbal Khan, Mário Nuno Mata, José Moleiro Martins, Adeel Nasir, Rui Miguel Dantas, Anabela Batista Correia, Mahr Umar Saghir


Environmental deregulation has become a severe concern for public health around the world. Increased pollution and ecological degradation have diverted attention towards adopting green practices, which can be possible if the sustainable green finance system is implemented in its true spirit. But previous studies reported certain factors affecting its implementation process, particularly in developing countries. This study aims to identify and quantify the barriers to adopting a green finance system. First, it identified twenty barriers through an extensive literature review and semi-structured interviews with experts in the fields of financial management, economics, and environmental sciences. Later, eighteen factors were finalized by the consensus of panel experts, which was further used to analyze their interrelationship through Interpretive Structural Modelling (ISM). Using MICMAC analysis, these barriers were categorized based on their diving-dependence powers. Finally, the conceptual ISM model is developed that provides a clear picture of the impediments to the green finance adoption system and their flow relationship among the identified barriers at different levels. The findings suggest that global level factors: lack of pressure from international organizations and unavailability of globally acceptable green criteria are critical to the prevalence of other factors that indicate its centrality to effectively implementing the green finance system. The developed model helps in designing, implementing, and promoting eco-friendly projects. It is also recommended that an appropriate framework is required to be developed at global, country, organizational, and individual levels to deal with the barriers of the green finance adoption system.


Doi: 10.28991/ESJ-2022-06-02-02

Full Text: PDF


Environmental Degradation; Green Finance System; Public Health; Economic System; Pollution; MICMAC Analysis; Green Criterion; Eco-friendly Projects.


Wang, L., Vo, X. V., Shahbaz, M., & Ak, A. (2020). Globalization and carbon emissions: Is there any role of agriculture value-added, financial development, and natural resource rent in the aftermath of COP21? Journal of Environmental Management, 268, 110712. doi:10.1016/j.jenvman.2020.110712.

Christmann, P., & Taylor, G. (2017). Globalization and the environment: Strategies for international voluntary environmental initiatives. Corporate Environmental Responsibility, 563–577. doi:10.4324/9781315259277-30.

Zhang, D., Zhang, Z., & Managi, S. (2019). A bibliometric analysis on green finance: Current status, development, and future directions. Finance Research Letters, 29, 425–430. doi:10.1016/

Egli, F., Schärer, D., & Steffen, B. (2022). Determinants of fossil fuel divestment in European pension funds. Ecological Economics, 191. doi:10.1016/j.ecolecon.2021.107237.

Sachs, J. D., Woo, W. T., Yoshino, N., & Taghizadeh-Hesary, F. (2019). Importance of Green Finance for Achieving Sustainable Development Goals and Energy Security. Handbook of Green Finance (pp. 3–12). doi:10.1007/978-981-13-0227-5_13.

Tol, R. S. J. (2018). The economic impacts of climate change. Review of Environmental Economics and Policy, 12(1), 4–25. doi:10.1093/reep/rex027.

Yanarella, E. J., Levine, R. S., & Lancaster, R. W. (2009). Green versus sustainability. Sustainability, 2(5), 296–302. doi:10.1089/SUS.2009.9838.

Chowdhury, T. U., Datta, R., & Mohajan, H. K. (2013). Green finance is essential for economic development and sustainability. International Journal of Research in Commerce, 3(10), 104–108.

Ahmad, M., Ahmed, Z., Yang, X., Hussain, N., & Sinha, A. (2021). Financial development and environmental degradation: Do human capital and institutional quality make a difference? In Gondwana Research. doi:10.1016/

Fu, J., & Ng, A. W. (2020). Sustainable energy and green finance for a low-carbon economy: Perspectives from the greater bay area of China. In Sustainable Energy and Green Finance for a Low-carbon Economy: Perspectives from the Greater Bay Area of China. Springer International Publishing. doi:10.1007/978-3-030-35411-4.

Zafar, S. S., Fiaz, M., Ikram, A., Khan, K. I., & Qamar, U. M. (2021). Barriers involve in the energy efficiency in the manufacturing industries of Pakistan. International Journal of Energy Economics and Policy, 11(2), 293–299. doi:10.32479/ijeep.7599.

Monasterolo, I., Roventini, A., & Foxon, T. J. (2019). Uncertainty of climate policies and implications for economics and finance: An evolutionary economics approach. Ecological Economics, 163, 177–182. doi:10.1016/j.ecolecon.2019.05.012.

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), 517. doi:10.3390/su11020517.

Yoshino, N., Schloesser, T., & Taghizadeh-Hesary, F. (2021). Social funding of green financing: An application of distributed ledger technologies. International Journal of Finance and Economics, 26(4), 6060–6073. doi:10.1002/ijfe.2108.

Rjoub, H., Odugbesan, J. A., Adebayo, T. S., & Wong, W. K. (2021). Sustainability of the moderating role of financial development in the determinants of environmental degradation: Evidence from turkey. Sustainability (Switzerland), 13(4), 1–18. doi:10.3390/su13041844.

Liu, N., Liu, C., Xia, Y., Ren, Y., & Liang, J. (2020). Examining the coordination between green finance and green economy aiming for sustainable development: A case study of China. Sustainability (Switzerland), 12(9), 3717. doi:10.3390/su12093717.

Cui, Y., Geobey, S., Weber, O., & Lin, H. (2018). The impact of green lending on credit risk in China. Sustainability (Switzerland), 10(6), 2008. doi:10.3390/su10062008.

Taghizadeh-Hesary, F., & Yoshino, N. (2019). The way to induce private participation in green finance and investment. Finance Research Letters, 31, 98–103. doi:10.1016/

Qin, J., Zhao, Y., & Xia, L. (2018). Carbon emission reduction with capital constraint under greening financing and cost sharing contract. International Journal of Environmental Research and Public Health, 15(4), 750. doi:10.3390/ijerph15040750.

Tolliver, C., Fujii, H., Keeley, A. R., & Managi, S. (2021). Green Innovation and Finance in Asia. Asian Economic Policy Review, 16(1), 67–87. doi:10.1111/aepr.12320.

Cui, X., Zhao, T., & Wang, J. (2021). Allocation of carbon emission quotas in China’s provincial power sector based on entropy method and ZSG-DEA. Journal of Cleaner Production, 284. doi:10.1016/j.jclepro.2020.124683.

He, L., Liu, R., Zhong, Z., Wang, D., & Xia, Y. (2019). Can green financial development promote renewable energy investment efficiency? A consideration of bank credit. Renewable Energy, 143, 974–984. doi:10.1016/j.renene.2019.05.059.

Boubaker, S., Nguyen, D. K., Berensmann, K., & Lindenberg, N. Green Finance: Across the Universe. Corporate Social Responsibility, Ethics and Sustainable Prosperity, 305–332.

Soundarrajan, P., & Vivek, N. (2016). Green finance for sustainable green economic growth in India. Agricultural Economics (Czech Republic), 62(1), 35–44. doi:10.17221/174/2014-AGRICECON.

D’Orazio, P., & Popoyan, L. (2019). Fostering green investments and tackling climate-related financial risks: Which role for macroprudential policies? Ecological Economics, 160, 25–37. doi:10.1016/j.ecolecon.2019.01.029.

Durrani, A., Rosmin, M., & Volz, U. (2020). The role of central banks in scaling up sustainable finance–what do monetary authorities in the Asia-Pacific region think? Journal of Sustainable Finance and Investment, 10(2), 92–112. doi:10.1080/20430795.2020.1715095.

Kamran, H. W., Haseeb, M., Nguyen, T. T., & Nguyen, V. C. (2020). Climate change and bank stability: The moderating role of green financing and renewable energy consumption in ASEAN. doi:10.31219/

Kirikkaleli, D., & Adebayo, T. S. (2021). Do renewable energy consumption and financial development matter for environmental sustainability? New global evidence. Sustainable Development, 29(4), 583–594. doi:10.1002/sd.2159.

Bieliński, T., & Mosionek-Schweda, M. (2018). Green bonds as a financial instrument for environmental projects funding. Unia Europejska. pl, 248(1), 13-21.

Azhgaliyeva, D. (2019). Energy storage and renewable energy deployment: Empirical evidence from OECD countries. Energy Procedia, 158, 3647-3651.

Volz, U., Böhnke, J., Eidt, V., Knierim, L., Richert, K., & Roeber, G.-M. (2015). Financing the Green Transformation — Market Failures, Government Failures and the Role of the State. Financing the Green Transformation, 7–21. doi:10.1057/9781137486127_2.

Jha, N., & Bhome, S. (2013). A study of green banking trends in India. International Monthly Referred Journal of Research in Management and Technology, 2, 127-132.

Wang, Y., & Zhi, Q. (2016). The role of green finance in environmental protection: Two aspects of market mechanism and policies. Energy Procedia, 104, 311-316.

Peng, H., Luo, X., & Zhou, C. (2018). Introduction to China’s Green Finance System. Journal of Service Science and Management, 11(01), 94–100. doi:10.4236/jssm.2018.111009.

Haleem, A., Sushil, Qadri, M. A., & Kumar, S. (2012). Analysis of critical success factors of world-class manufacturing practices: An application of interpretative structural modelling and interpretative ranking process. Production Planning and Control, 23(10–11), 722–734. doi:10.1080/09537287.2011.642134.

Dowson, M., Poole, A., Harrison, D., & Susman, G. (2012). Domestic UK retrofit challenge: Barriers, incentives and current performance leading into the Green Deal. Energy Policy, 50, 294–305. doi:10.1016/j.enpol.2012.07.019.

Lee, J. H., & Woo, J. (2020). Green new deal policy of South Korea: Policy innovation for a sustainability transition. Sustainability (Switzerland), 12(23), 1–17. doi:10.3390/su122310191.

Zubair Mumtaz, D. M., & Alexander Smith, D. Z. (2019). Green Finance for Sustainable Development in Pakistan. IPRI Journal, 2, 1–34. doi:10.31945/iprij.190201.

Charles, G., & Philip, B. (2020). Green Finance: Recent Drifts, Confrontation and Prospect Opportunities for Sustainable Development in India. Mukt Shabd Journal, 9(4), 1854–1865.

Khan, K. I., Babar, Z., Sharif, S., Iqbal, S., & Khan, M. I. (2021). Going green? Investigating the role of GSCM practices on firm financial and environmental performance through green innovation. International Journal of Procurement Management, 14(6), 681–701. doi:10.1504/IJPM.2021.117894.

Mohd, S., & Kaushal, V. K. (2018). Green Finance: A Step towards Sustainable Development. MUDRA : Journal of Finance and Accounting, 5(1), 59–74. doi:10.17492/mudra.v5i01.13036.

Guild, J. (2020). The political and institutional constraints on green finance in Indonesia. Journal of Sustainable Finance and Investment, 10(2), 157–170. doi:10.1080/20430795.2019.1706312.

Runhaar, H., Tigchelaar, C., & Vermeulen, W. J. V. (2008). Environmental leaders: Making a difference. A typology of environmental leaders and recommendations for a differentiated policy approach. Business Strategy and the Environment, 17(3), 160–178. doi:10.1002/bse.520.

Ren, X., Shao, Q., & Zhong, R. (2020). Nexus between green finance, non-fossil energy use, and carbon intensity: Empirical evidence from China based on a vector error correction model. Journal of Cleaner Production, 277, 122844. doi:10.1016/j.jclepro.2020.122844.

Soedarmono, W., Machrouh, F., & Tarazi, A. (2011). Bank market power, economic growth and financial stability: Evidence from Asian banks. Journal of Asian Economics, 22(6), 460–470. doi:10.1016/j.asieco.2011.08.003.

Gupta, H., & Barua, M. K. (2018). A framework to overcome barriers to green innovation in SMEs using BWM and Fuzzy TOPSIS. Science of the Total Environment, 633, 122–139. doi:10.1016/j.scitotenv.2018.03.173.

Banga, J. (2019). The green bond market: a potential source of climate finance for developing countries. Journal of Sustainable Finance and Investment, 9(1), 17–32. doi:10.1080/20430795.2018.1498617.

Ghisetti, C., Mancinelli, S., Mazzanti, M., & Zoli, M. (2017). Financial barriers and environmental innovations: evidence from EU manufacturing firms. Climate Policy, 17, S131–S147. doi:10.1080/14693062.2016.1242057.

Frederick, W. C. (1997). Financing change: The financial community, eco-efficiency, and sustainable development. The Journal of Socio-Economics, 26(4), 459–463. doi:10.1016/s1053-5357(97)90007-x.

Petruzzelli, A. M., Dangelico, R. M., Rotolo, D., & Albino, V. (2011). Organizational factors and technological features in the development of green innovations: Evidence from patent analysis. Innovation: Management, Policy and Practice, 13(3). doi:10.5172/impp.2011.13.3.291.

Matus, K. J. M., Xiao, X., & Zimmerman, J. B. (2012). Green chemistry and green engineering in China: Drivers, policies and barriers to innovation. Journal of Cleaner Production, 32, 193–203. doi:10.1016/j.jclepro.2012.03.033.

Abuzeinab, A., Arif, M., & Qadri, M. A. (2017). Barriers to MNEs green business models in the UK construction sector: An ISM analysis. Journal of Cleaner Production, 160, 27–37. doi:10.1016/j.jclepro.2017.01.003.

Zubair Mumtaz, D. M., & Alexander Smith, D. Z. (2019). Green Finance for Sustainable Development in Pakistan. IPRI Journal, 2, 1–34. doi:10.31945/iprij.190201.

Rahman, T., Ali, S. M., Moktadir, M. A., & Kusi-Sarpong, S. (2020). Evaluating barriers to implementing green supply chain management: An example from an emerging economy. Production Planning and Control, 31(8), 673–698. doi:10.1080/09537287.2019.1674939.

Choi, C. (2009). Removing Market Barriers to Green Development: Principles and Action Projects to Promote Widespread Adoption of Green Development Practices. Journal of Sustainable Real Estate, 1(1), 107–138. doi:10.1080/10835547.2009.12091785.

Samari, M., Godrati, N., Esmaeilifar, R., Olfat, P., & Shafiei, M. W. M. (2013). The investigation of the barriers in developing green building in Malaysia. Modern Applied Science, 7(2), 1–10. doi:10.5539/mas.v7n2p1.

Nguyen, T. C., Chuc, A. T., & Dang, L. N. (2019). Green Finance in Viet Nam. In Handbook of Green Finance (pp. 675–705). doi:10.1007/978-981-13-0227-5_35.

Yoshino, N., Taghizadeh-Hesary, F., & Nakahigashi, M. (2019). Modelling the social funding and spill-over tax for addressing the green energy financing gap. Economic Modelling, 77, 34–41. doi:10.1016/j.econmod.2018.11.018.

Sareen, A., & Sharma, S. (2021). Assessing Financial Distress and Predicting Stock Prices of Automotive Sector: Robustness of Altman Z-score. Vision: The Journal of Business Perspective, 097226292199092. doi:10.1177/0972262921990923.

Nag, R., & Gioia, D. A. (2012). From common to uncommon knowledge: Foundations of firm-specific use of knowledge as a resource. Academy of Management Journal, 55(2), 421–457. doi:10.5465/amj.2008.0352.

Gioia, D. A., Corley, K. G., & Hamilton, A. L. (2013). Seeking Qualitative Rigor in Inductive Research: Notes on the Gioia Methodology. Organizational Research Methods, 16(1), 15–31. doi:10.1177/1094428112452151.

Nath, V., Kumar, R., Agrawal, R., Gautam, A., & Sharma, V. (2014). Impediments to Adoption of Green Products: An ISM Analysis. Journal of Promotion Management, 20(5), 501–520. doi:10.1080/10496491.2014.946200.

Gholami, H., Rezaei, G., Saman, M. Z. M., Sharif, S., & Zakuan, N. (2016). State-of-the-art Green HRM System: Sustainability in the sports center in Malaysia using a multi-methods approach and opportunities for future research. Journal of Cleaner Production, 124, 142–163. doi:10.1016/j.jclepro.2016.02.105.

Makki, A. A., Alidrisi, H., Iqbal, A., & Al-Sasi, B. O. (2020). Barriers to Green Entrepreneurship: An ISM-Based Investigation. Journal of Risk and Financial Management, 13(11), 249. doi:10.3390/jrfm13110249.

Mojumder, A., & Singh, A. (2021). An exploratory study of the adaptation of green supply chain management in construction industry: The case of Indian Construction Companies. Journal of Cleaner Production, 295, 295. doi:10.1016/j.jclepro.2021.126400.

Sarkar, A., Qian, L., Peau, A. K., & Shahriar, S. (2021). Modeling drivers for successful adoption of green business: an interpretive structural modeling approach. Environmental Science and Pollution Research, 28(1), 1077–1096. doi:10.1007/s11356-020-10490-z.

Mathiyazhagan, K., Govindan, K., NoorulHaq, A., & Geng, Y. (2013). An ISM approach for the barrier analysis in implementing green supply chain management. Journal of Cleaner Production, 47, 283–297. doi:10.1016/j.jclepro.2012.10.042.

Awuzie, B. O., & Abuzeinab, A. (2019). Modelling organisational factors influencing sustainable development implementation performance in higher education institutions: An interpretative structural modelling (ISM) approach. Sustainability (Switzerland), 11(16), 4312. doi:10.3390/su11164312.

Priya, S. S., Priya, M. S., Jain, V., & Dixit, S. K. (2021). An assessment of government measures in combatting COVID-19 using ISM and DEMATEL modelling. Benchmarking. doi:10.1108/BIJ-05-2021-0244.

Stireman, J. O., Dyer, L. A., Janzen, D. H., Singer, M. S., Lill, J. T., Marquis, R. J., Ricklefs, R. E., Gentry, G. L., Hallwachs, W., Coley, P. D., Barone, J. A., Greeney, H. F., Connahs, H., Barbosa, P., Morais, H. C., & Diniz, I. R. (2005). Climatic unpredictability and parasitism of caterpillars: Implications of global warming. Proceedings of the National Academy of Sciences of the United States of America, 102(48), 17384–17387. doi:10.1073/pnas.0508839102.

Rosales, J. (2008). Economic growth, climate change, biodiversity loss: Distributive justice for the global north and south. Conservation Biology, 22(6), 1409–1417. doi:10.1111/j.1523-1739.2008.01091.x.

Fankhauser, S., & Tol, R. S. J. (2005). On climate change and economic growth. Resource and Energy Economics, 27(1), 1–17. doi:10.1016/j.reseneeco.2004.03.003.

Raut, R. D., Narkhede, B., & Gardas, B. B. (2017). To identify the critical success factors of sustainable supply chain management practices in the context of oil and gas industries: ISM approach. Renewable and Sustainable Energy Reviews, 68, 33–47. doi:10.1016/j.rser.2016.09.067.

Full Text: PDF

DOI: 10.28991/ESJ-2022-06-02-02


  • There are currently no refbacks.

Copyright (c) 2022 Rui Miguel Dantas