Green finance moderates the association between foreign direct investment and green economic growth in Southeast Asian economies

Abstract

This study investigates how green finance (GF) moderates the relationship between foreign direct investment (FDI) and green economic growth (GEG) in seven Southeast Asian economies over 2013–2023. Using pooled OLS, fixed effects, random effects, and feasible generalized least squares (FGLS), we find that FDI and conventional financial development are negatively associated with GEG, whereas GF is positively associated with GEG. The FDI×GF interaction is positive and statistically significant, indicating that higher GF attenuates the negative FDI-GEG association. A support-aware marginal-effect check shows that the implied zero crossing occurs at GF = 30.5 on the ln(1 + investment) scale, far outside the observed GF range of 0–7.04; therefore, the data do not support an in-sample sign reversal or an actionable monetary threshold. Sensitivity checks using an alternative dependent variable and time fixed effects preserve the direction of the principal coefficients. The findings contribute by integrating FDI, financial development, and green finance in a single ASEAN framework and by showing that green finance can mitigate, although not reverse within the observed sample, the adverse association between FDI and green economic growth.