Green finance and its impact on Peruvian economic development

Abstract

Researchers and policymakers worldwide are always searching for a solution that may give both economic growth and ecological balance. A new type of financial innovation, green finance, has been identified by the International Finance Corporation as one that may both boost the economy and benefit the environment. Although Peru's natural resources are abundant, achieving resource efficiency is a considerable challenge. The necessity to address inadequate domestic value-added in resource utilization is evident when it comes to mineral extraction. There is also a lack of water efficiency in Peru because current tariff rates do not adequately reflect the actual cost of water as a limited resource. This study attempts to address and provide various solutions to achieving economic growth through green financing by conducting correlation analysis, OLS, and robust regression analysis. From the results, the study determined a positive relationship between green financing and economic development, implying that if the government invests in green funding, the influence of government cooperation can go beyond the ability to raise money. In reality, international collaboration accounts for less than 0.25 percent of overall government spending, while environmental funding accounts for only 2.2 percent of total public expenditure on the environment. A critical mass of organizations and people is needed to support policy execution, and the ability to develop information and evidence-based policy is the most relevant influence. © 2022 Elsevier B.V., All rights reserved.