Foreign direct investment, technology transfer and the global issuance of green bonds

Abstract

This study examines the effect of foreign direct investment and technology transfer on the issuance of green bonds, utilizing new International Monetary Fund data for sixty-seven countries from 2000 to 2022. Our findings show that countries promoting foreign direct investment-based technology transfers experience increased growth in green bond issuance, highlighting the connection between industrial, environmental, and sustainable finance considerations. Financial, environmental and institutional factors—such as biodiversity and landscape protection expenditure, geopolitical risks, net electricity imports, sovereign debt ratings, and inflation—are also linked to higher green bond issuance. However, the influence of foreign direct investment and technology transfer may be nonlinear and immediate. Countries focusing on foreign direct investment-based technology transfer may experience difficulties in advancing green finance due to concerns about economic and political dependence. Additionally, factors such as the availability of scientists and engineers, innovation capacity, and monetary policy tightness significantly mediate the effect of foreign direct investment-based technology transfer on green finance. These insights offer valuable guidance for both public and private sector initiatives involved in green financing.

Keywords: Green Bonds, Foreign Direct Investment, Technology Transfer, Institutions, Global