Green Finance as a Catalyst for Sustainable Performance: The Mediating Effects of Green Innovation and Green Capabilities and the Moderating role of stakeholder pressure

Abstract

This study examined the role of green finance in enhancing sustainable performance, with a focus on the mediating effects of green innovation and green capabilities and the moderating role of stakeholder pressure. The study adopted a quantitative research design and collected data from 320 respondents working in manufacturing and service sector firms in Pakistan. Structural equation modelling (SEM) was applied to test the proposed relationships.

The findings indicated that green finance exerted a significant positive effect on sustainable performance (β = 0.42, p < 0.001). Green innovation (β = 0.31, p < 0.001) and green capabilities (β = 0.36, p < 0.001) also showed significant positive effects on sustainable performance. Mediation analysis revealed that green innovation (β = 0.19, p < 0.001) and green capabilities (β = 0.22, p < 0.001) partially mediated the relationship between green finance and sustainable performance. Stakeholder pressure significantly moderated this relationship (β = 0.27, p < 0.01), strengthening the positive impact of green finance under higher levels of external pressure.

The results emphasized that financial investment in environmental initiatives contributed more effectively to sustainability outcomes when supported by innovation, organizational capabilities, and stakeholder engagement. The study provided theoretical and practical implications for enhancing sustainability strategies in organizations.

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