Impacts of Foreign Direct Investment on Sustainable Development: Considering the Role of Green Finance

Abstract

The paper examines the role of green finance (GF) in 54 countries worldwide, including Vietnam, from 2008 to 2021. It also analyzes the effects of foreign direct investment (FDI) on sustainable development (SDGI). The results of the Bayesian regression indicate that GF has a positive influence on SDGI with an average coefficient of = 0,0046 and that the probability that GF will have a positive impact on SDGI is 75,66%. This chance is 68,23% in Vietnam. FDI negatively affects sustainable development, with a chance of 68,77%, or an average coefficient of -0.0430, for FDI adversely impacts SDGI. In Vietnam, the probability can reach 87,31%. When considering the role of green finance (FDIGF), this relationship promotes sustainable development with an average beta = 0,0006 and a probability of positive impact of 93,89%, while in Vietnam, this figure is 72,19%. According to the abovementioned findings, the group recommends that Vietnam improve international cooperation to attract more foreign investors, transfer green financial technology, and create policies and legal frameworks to support green finance initiatives. Vietnam should entice more foreign investors to fund initiatives involving waste treatment and renewable energy simultaneously. These initiatives contribute to lowering environmental pollution and improving the area's added value by giving locals employment opportunities.