The Role of Green Finance in Driving Artificial Intelligence and Renewable Energy for Sustainable Development

Abstract

ABSTRACT This study contributes to the literature on sustainable development by investigating the mechanisms through which green finance fosters sustainability in emerging economies. Given the increasing importance of artificial intelligence (AI) and renewable energy in environmental transitions, we explore their roles as mediators in the relationship between green finance and sustainability. Using a dataset covering 2015–2022, we apply Baron and Kenny's (1986) mediation approach combined with advanced econometric techniques to assess green finance's direct and indirect effects on sustainable development. Our findings reveal that green finance directly enhances sustainable development while significantly promoting AI and renewable energy capacity. However, once these mediators are included, the direct effect of green finance on sustainability weakens, indicating a partial mediation effect. Moreover, the study identifies the additional mediating role of AI in linking green finance to renewable energy capacity and amplifying its overall impact. These results highlight the critical interplay between green finance, AI, and renewable energy in achieving environmental and economic sustainability. Policymakers in emerging economies should prioritize green finance initiatives, invest in AI‐driven clean energy solutions, and support decentralized renewable energy projects to accelerate sustainability transitions.