ASEAN Journal on Science and Technology for Development


Economic growth strongly depends on financial stability, given that the financial sector conducts most transactions in the real economy. Financial instability causes banking institutions to be wary about backing profitable businesses, resulting in a reluctance to fund such activities. Green financing is one of the measures to minimize banking instability. In general, the role of green financing would be to mitigate climate change risk and control the environment. Numerous studies have been conducted on an empirical model of the relationship between climate change and the financial stability of banking institutions. However, little emphasis is placed on the context of adopting green financing. Therefore, this study aims to investigate the mediating role of green financing in the relationship between climate change and bank stability among the Tiger Cub Economies, which include Indonesia, Malaysia, Philippines, Vietnam, and Thailand. Using a dataset from 2010 to 2020 and following Baron and Kenny's (1986) approach, the data were analyzed via a panel data technique. The findings imply that green financing initiatives would maintain the banking sector to have a financial stability over time.

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