Do Market Institutions Promote Green Finance? The Moderating Role of Generalized Trust

Svetlana S. Gutman, Maya M. Egorova

Peter the Great St. Petersburg Polytechnic University, Saint-Petersburg, Russia

Abstract

In the context of the global transition to a low-carbon economy, green finance is becoming a key tool for achieving sustainable development goals. However, the dynamics of the green bond market vary significantly across countries, driven not only by economic but also by institutional and sociocultural factors. This issue is particularly acute in emerging economies and the BRICS bloc, where institutional heterogeneity limits the scaling of sustainable investments. This study examines the impact of capitalist system types and the level of interpersonal trust on green bond issuance volumes. Using panel data for 21 countries from 2017 to 2023, we analyze how the type of capitalist system and the level of interpersonal trust affect green bond emissions. The type of capitalism is defined through principal components (PCA1 and PCA2), constructed based on probabilistic weights of countries’ affiliation with market, Scandinavian, continental, and Asian models. Interpersonal trust is measured as the share of respondents who answered positively to the World Values Survey question regarding whether most people can be trusted. Using a random-effects panel regression model, we establish that the impact of the market institutional component (PCA1) on green bond issuance is not direct but varies depending on the level of interpersonal trust. The results show that at low levels of trust (below 23–24 percentage points), the relationship between PCA1 and green bond issuance is negative. Above this threshold, the effect of PCA1 becomes positive. At the sample mean level of trust (44 percentage points) and higher, the market institutional environment acts as a catalyst for green finance development. The paper shows the nonlinear influence of the capitalist model on the issuance of green bonds, suggests measuring the institutional structure of the economy through its main components, and confirms the crucial role of interpersonal trust in the development of green finance. The findings confirm that the successful launch of environmental projects in BRICS countries depends on a combination of developed formal institutions and a high level of interpersonal trust.

Keywords

green bonds; institutional environment; interpersonal trust; BRICS countries.

JEL classification

References

1. Abramov, A.E., Akshentseva, K.S. (2011). Models of Financial Systems of Foreign Countries. Moscow, Russian Presidential Academy of National Economy and Public Administration, 96 p. (In Russ.). Available at: https://publications.hse.ru/pubs/share/folder/o1popwkbpb/118114846.pdf

         2. Pouyan, M., Zhangaliyeva, K., Faizulayev, A. (2023). Impact of Country-Level Factors on Green Bonds Issuance: Comparison Between BRICS and G7 Countries. In: Sustainable Development in Banking and Finance. Proceedings of 7th International Conference on Banking and Finance Perspectives. Edited by N. Ozatac, N. Taspinar, B. Rustamov. Springer Cham, 181–198. https://doi.org/10.1007/978-3-031-65533-3_11

         3. Mertzanis, C. (2023). Energy policy diversity and green bond issuance around the world. Energy Economics, Vol. 128, 107116. https://doi.org/10.1016/j.eneco.2023.107116

         4. Mertzanis, C., Tebourbi, I. (2024). National culture and green bond issuance around the world. European Financial Management, Vol. 30, Issue 2, 879–934. https://doi.org/10.1111/eufm.12419

         5. Nguyen, L.H., Dung, D.A., Minh, P.N., Quynh, D.T.T., Ngan, P.T.T. (2023). Exploring the cultural forces behind green bond issuance. Journal of International Economics and Management, Vol. 23, No. 3, 1–22. https://doi.org/10.38203/jiem.023.3.0071

         6. Sajid, M., Ansari, M.A.A., Tanveer, A., Faheem, M., Waseem, A. (2023). Evaluating the influence of green growth, institutional quality and financial inclusion on financial stability: evidence by sustainable finance theory. Environmental Science and Pollution Research, Vol. 30, Issue 54, 115965–115983. https://doi.org/10.1007/s11356-023-30362-6

         7. Sethi, L., Behera, B., Sethi, N. (2024). Do green finance, green technology innovation, and institutional quality help achieve environmental sustainability? Evidence from the developing economies. Sustainable Development, Vol. 32, Issue 3, 2709–2723. https://doi.org/10.1002/sd.2811

         8. Sun, X., Meng, Z., Zhang, X., Wu, J. (2025). The role of institutional quality in the nexus between green financing and sustainable development. Research in International Business and Finance, Vol. 73, Part A, 102531. https://doi.org/10.1016/j.ribaf.2024.102531

         9. Shah, S.S., Asghar, Z. (2024). Individual attitudes towards environmentally friendly choices: a comprehensive analysis of the role of legal rules, religion, and confidence in government. Journal of Environmental Studies and Sciences, Vol. 14, Issue 4, 629–651. https://doi.org/10.1007/s13412-024-00913-5

         10. Doyle, J. (2023). Social trust, cultural trust, and the will to sacrifice for environmental protections. Social Science Research, Vol. 109, 102779. https://doi.org/10.1016/j.ssresearch.2022.102779

         11. Zheng, W., Gao, Y., Xi, J. (2025). When Does Generalized Trust Promote Pro‐Environmental Behavior? A Multilevel Analysis. Scandinavian Journal of Psychology, Vol. 66, Issue 4, 571–577. https://doi.org/10.1111/sjop.13102

         12. Czeglédi, P. (2022). Why does the confidence in companies, but not the confidence in the government, affect the demand for regulation differently across countries? Public Choice, Vol. 193, Issue 3, 211–231. https://doi.org/10.1007/s11127-022-01013-0

         13. Boiko, L. (2024). Building Trust through government-public interaction: Evaluating government effectiveness. Collection of Scientific Papers «ΛΌГOΣ», April, 94–96. https://doi.org/10.36074/logos-26.04.2024.015

         14. Saha, S., Sadekin, M.N., Saha, S.K. (2022). Effects of institutional quality on foreign direct investment inflow in lower-middle income countries. Heliyon, Vol. 8, Issue 10, e10828. https://doi.org/10.1016/j.heliyon.2022.e10828

         15. Kwilinski, A. (2025). GDP per capita vs foreign direct investment: key drivers of a country's technological leadership. Technological and Economic Development of Economy, Vol. 31, Issue 5, 1320–1344. https://doi.org/10.3846/tede.2025.22857

         16. Oxford University Press (2001). Varieties of Capitalism: The Institutional Foundations of Comparative Advantage. Edited by P.A. Hall, D. Soskice, 540 p. Available at: http://digamo.free.fr/hallsosk.pdf

         17. Hall, P.A., Thelen, K. (2009). Institutional change in varieties of capitalism. Socio-Economic Review, Vol. 7, Issue 1, 7–34. https://doi.org/10.1093/ser/mwn020

         18. Movahed, M. (2023). Varieties of capitalism and income inequality. International Journal of Comparative Sociology, Vol. 64, Issue 6, 621–657. https://doi.org/10.1177/00207152231174158

         19. Smoleńska, A. (2026). European capitalisms in sustainability transition: the case of green bonds. Journal of European Public Policy, Vol. 33, Issue 6, 1572–1598. https://doi.org/10.1080/13501763.2025.2521395

         20. Meng, Y., Chen, H., Ning, X., Qi, Y. (2024). The pricing of green bonds: Does social capital matter? Evidence from China. Finance Research Letters, Vol. 67, Part A, 105756. https://doi.org/10.1016/j.frl.2024.105756

         21. Benlemlih, M., Jaballah, J. (2025). Green bond issuance and energy transition: the moderator effect of national culture. Journal of Asset Management, Vol. 26, Issue 7, 804–818. https://doi.org/10.1057/s41260-025-00429-9

         22. Mertzanis, C., Tebourbi, I. (2024). National culture and green bond issuance around the world. European Financial Management, Vol. 30, Issue 2, 879–934. https://doi.org/10.1111/eufm.12419

         23. Olesen, J.E., Rees, R.M., Recous, S., et al. (2023). Challenges of accounting nitrous oxide emissions from agricultural crop residues. Global Change Biology, Vol. 29, Issue 24, 6846–6855. https://doi.org/10.1111/gcb.16962

         24. Lin, L., Hong, Y. (2022). Developing a green bonds market: lessons from China. European Business Organization Law Review, Vol. 23, Issue 1, 143–185. https://doi.org/10.1007/s40804-021-00231-1

         25. Fu, J., Ng, A. W. (2021). Scaling up renewable energy assets: Issuing green bond via structured public-private collaboration for managing risk in an emerging economy. Energies, Vol. 14, Issue 11, 3076. https://doi.org/10.3390/en14113076

         26. Liu, Z., Deng, Z., He, G., Wang, H., Zhang, X., Lin, J., Liang, X. (2022). Challenges and opportunities for carbon neutrality in China. Nature Reviews Earth & Environment, Vol. 3, Issue 2, 141–155. https://doi.org/10.1038/s43017-021-00244-x

         27. Liu, S., Qi, H., Wan, Y. (2022). Driving factors behind the development of China's green bond market. Journal of Cleaner Production, Vol. 354, 131705. https://doi.org/10.1016/j.jclepro.2022.131705

         28. Thakur, A.K., Singh, R., Gehlot, A., Kaviti, A.K., Aseer, R., Suraparaju, S.K. Sikarwar, V.S. (2022). Advancements in solar technologies for sustainable development of agricultural sector in India: a comprehensive review on challenges and opportunities. Environmental Science and Pollution Research, Vol. 29, Issue 29, 43607–43634. https://doi.org/10.1007/s11356-022-20133-0

         29. Kumar, C.M.S., Singh, S., Gupta, M.K., Nimdeo, Y.M., Raushan, R., Deorankar, A.V., Nannaware, A.D. (2023). Solar energy: A promising renewable source for meeting energy demand in Indian agriculture applications. Sustainable Energy Technologies and Assessments, Vol. 55, 102905. https://doi.org/10.1016/j.seta.2022.102905

         30. Yadav, A., Kumar, A., K, M. (2024). Agrivoltaic systems in Indian context: a multi-dimensional examination. Energy Systems, 1–26. https://doi.org/10.1007/s12667-024-00712-5

         31. Rajagopalan, S., Breetz, H.L. (2022). Niches, narratives, and national policy: how India developed off-grid solar for rural electrification. Environmental Innovation and Societal Transitions, Vol. 43, 41–54. https://doi.org/10.1016/j.eist.2022.02.004

         32. Parreira Perin, V. (2025). Sustainability for Finance: Situating Green Bonds in the Assetization of Brazilian Agriculture. Journal of Agrarian Change, Vol. 25, Issue 3, e70004. https://doi.org/10.1111/joac.70004

         33. Miola, I., De Oliveira Junqueira, G., Prol, F., Ferrando, T., Vecchione-Gonçalves, M., Herrera, H. (2021). Bonos verdes en la ecología-mundo: capital, naturaleza y poder en la expansión financiarizada de la industria forestal en Brasil. Relaciones Internacionales, No. 46, 161–180. https://doi.org/10.15366/relacionesinternacionales2021.46.009

         34. Ferrando, T., Junqueira, G.D.O., Vecchione-Gonçalves, M., Miola, I., Prol, F. M., Herrera, H. (2021). Capitalizing on green debt: A world-ecology analysis of green bonds in the Brazilian forestry sector. Journal of World-Systems Research, Vol. 27, No. 2, 410–438. https://doi.org/10.5195/jwsr.2021.1062

         35. Khudyakova, L.S., Urumov, T.R. (2021). Green Finance in BRICS Countries. World Eсonomy and International Relations, Vol. 65, No. 9, 79–87. (In Russ.). https://doi.org/10.20542/0131-2227-2021-65-9-79-87

         36. Niyazbekova, S., Troyanskaya, M., Toygambayev, S., Rozhkov, V., Zhukov, A., Aksenova, E., Ivanova, O. (2021). Instruments for financing and investing the “green” economy in the country’s environmental projects. E3S Web of Conferences, Vol. 244, 10054. EDP Sciences. https://doi.org/10.1051/e3sconf/202124410054

         37. Shamanina, E. A. (2023). Public–Private Partnerships and Green Financing of Infrastructure Projects. In: Current Problems of the Global Environmental Economy under the Conditions of Climate Change and the Perspectives of Sustainable Development. Edited by E.G. Popkova, B.S. Sergi. Springer Cham, 365–374. https://doi.org/10.1007/978-3-031-19979-0_39

         38. Berezin, A., Sergi, B.S., Gorodnova, N. (2018). Efficiency assessment of public-private partnership (PPP) projects: The case of Russia. Sustainability, Vol. 10, Issue 10, 3713. https://doi.org/10.3390/su10103713

Acknowledgements

This research was conducted with the financial support of the Russian Federation represented by the Ministry of Science and Higher Education of the Russian Federation as part of the project "Managing the Sustainable Development of Industrial Structures within the Water-Energy-Food Nexus Framework" (Agreement No. 075-15-2024-673).

About Authors

Svetlana Semenovna Gutman

Candidate of Economic Sciences, Associate Professor, Peter the Great St. Petersburg Polytechnic University, Saint-Petersburg, Russia (195251, Saint-Petersburg, Polytechnicheskaya street, 29); ORCID https://orcid.org/0000-0002-1098-3915 e-mail: SGutman@spbstu.ru

Maya Mikhailovna Egorova

Specialist, Peter the Great St. Petersburg Polytechnic University, Saint-Petersburg, Russia (195251, Saint-Petersburg, Polytechnicheskaya street, 29); ORCID https://orcid.org/0009-0005-7026-0304 e-mail: egorova_mm@spbstu.ru

For citation

Gutman, S.S., Egorova, M.M. (2026). Do Market Institutions Promote Green Finance? The Moderating Role of Generalized Trust. Journal of Applied Economic Research, Vol. 25, No. 3, 991-1021. https://doi.org/10.15826/vestnik.2026.25.3.033

Article info

Received April 3, 2026; Revised June 12, 2026; Accepted July 15, 2026.

DOI: http://dx.doi.org/10.15826/vestnik.2026.25.3.033

Download full text article: