In an era defined by escalating environmental concerns and an imperative to reshape traditional economic paradigms, the concept of sustainable development has ascended to the forefront of global discourse ^[1][2][3][1,2,3]. Encompassing the harmonization of economic prosperity, social equity, and ecological integrity, the pursuit of sustainable development stands as a linchpin for steering societies toward a balanced and resilient future [4]. Amid this pivotal transformation, scholars ^[5][6][7][5,6,7] underline that the role of finance emerges as a paramount driver, wielding the potential to either perpetuate unsustainable practices or propel a transition to more regenerative and inclusive models ^[8][9][8,9].

Green finance, with its distinctive emphasis on aligning financial activities with ecological imperatives, emerges as a pivotal mechanism within this evolutionary landscape. Defined by its capacity to channel capital toward projects that yield both economic returns and positive environmental outcomes, green finance embodies a catalytic force capable of reshaping industries ^{[10][11][12][13]}[10,11,12,13], fostering innovation ^{[14][15][16][17]}[14,15,16,17], and steering economies toward sustainable trajectories ^{[18][19][20][21][22][23][24]}[18,19,20,21,22,23,24]. At its core, green finance transcends the realms of mere fiscal transactions, transcending into a dynamic conduit for progress that marries economic aspirations with planetary well-being ^[25][26][27][25,26,27].

Considering official reports and indices such as the United Nations Sustainable Development Goals Index [28] and the European Sustainable Development Report [29], EU countries have different levels of success in attaining sustainable development goals (SDGs). The effectiveness of EU countries in attaining SDGs is based on a range of factors, including economic development, policy implementation, social initiatives, and environmental efforts. According to official reports ^[28][29][28,29], Nordic countries (Sweden, Denmark, Finland, Norway) have comprehensive social welfare systems, high levels of gender equality, quality education, and strong environmental policies. They tend to perform well across multiple SDGs, particularly those related to clean energy, gender equality, quality education, and climate action ^[28][29][28,29]. Germany advances renewable energy policies, robust healthcare systems, strong environmental regulations, and contributions to international development efforts. It typically performs well in goals related to clean energy, industry innovation, quality education, and decent work and economic growth ^[28][29][28,29]. The Netherlands is recognized for its efficient public transportation, sustainable urban planning, and water management practices. It excels in SDGs related to clean water and sanitation, sustainable cities and communities, and climate action ^[28][29][28,29]. Austria has high-quality healthcare and education systems, as well as efforts to promote renewable energy and environmental conservation. It performs well in goals related to good health and well-being, quality education, and clean energy ^[28][29][28,29]. Estonia has made strides in digital innovation, e-governance, and connectivity. It performs well in SDGs related to innovation and industry, sustainable cities, and quality education ^[28][29][28,29]. In this case, it is useful to analyze the spillover effects of green finance, revealing the interconnectedness of regional progress among EU countries and providing actionable insights for effective policymaking, cross-border collaboration, and targeted sustainable development strategies.

2. The Intersection of Green Finance and Sustainable Development 

The interplay between green finance and the attainment of sustainable development goals (SDGs) within European Union (EU) countries has garnered significant attention in recent years. Rasoulinezhad and Taghizadeh-Hesary [30] confirm the link between green finance, green energy consumption, and energy efficiency using Granger tests and the STIRPAT framework for green leaders from 2002 to 2018. They reveal that green bonds aid green energy deployment and reduce CO₂ emissions in the long term. Similar conclusions were obtained by Ahmed et al. [31] for ASEAN countries. Rasoulinezhad and Taghizadeh-Hesary [30] outline the actuality of long-term support policies for green energy investment, increased green bond volume, and energy efficiency. Based on a survey questionnaire, Ronaldo and Suryanto [32] indicate that green finance significantly contributes to SDGs by promoting green technology innovation and green microenterprises, leading to enhanced environmental and economic sustainability. Huang et al. [33] investigate the influence of green finance on businesses’ green innovation toward SDGs in China. By employing a difference-in-difference methodology, the research demonstrates that green finance policies stimulate high-quality green innovation while discouraging low-quality attempts. This impact is more significant within specific industries and enterprise categories, fostering enhanced green productivity growth and enriching our understanding of the interplay between green finance, innovation, and SDGs [33]. However, based on the results of panel cointegration analysis, Zhang et al. [34] prove that green finance could provoke a decline in renewable energy growth in China. Mohanty et al. [35] and Du et al. [36], based on the results of the bibliometric analysis, show that green finance stimulates market businesses, notably propelling economic sustainability through the growth of the green industry, encompassing power generation, ecological sustainability, cleaner production, and renewable energy sectors. Bei and Wang [37] outline that green investment boosts the extension of renewable energy and, consequently, stimulates the attainment of SDGs. Based on the results of the cross-sectional ARDL technique, Jian and Afshan [38] confirm that green finance stimulates carbon neutrality in the short and long term. Prior studies ^[39][40][39,40] show that green investment promotes the SDGs via green projects and renewable energies. Past studies ^[41][42][43][41,42,43] outline that green finance promotes environmentally friendly practices and technology adoption, which in high-density regions lead to improved resource management, reduced emissions, and enhanced quality of life, aligning with SDG targets for clean energy, sustainable cities, and climate action. By strategically applying green finance in densely populated areas, communities drive positive impacts on their environment and social well-being, contributing to broader sustainability objectives ^[41][42][43][41,42,43]. Scholars ^[44][45][46][44,45,46] show that green finance’s ability to channel funds into eco-friendly projects leads to reduced energy consumption and alignment with SDGs such as clean energy and climate action. However, the studies ^[47][48][49][47,48,49] outline that green finance might divert resources from essential sectors, promote surface-level changes without addressing systemic issues, and even be prone to “greenwashing”, where initiatives appear environmentally friendly without substantial impact. It underscores the need for a balanced and holistic approach, considering both the potential benefits and possible limitations of using green finance to achieve SDGs related to energy consumption and sustainability ^[47][48][49][47,48,49]. Past studies ^[50][51][50,51] confirm that efficient governance enhances the allocation of resources and regulatory frameworks, fostering an environment conducive to green finance initiatives. This, in turn, accelerates progress toward SDGs related to environmental sustainability [52] and clean energy ^[50][51][50,51]. However, studies ^[53][54][53,54] outline that an overemphasis on government efficiency might sideline social and equity considerations, leading to an unequal distribution of benefits from green finance projects.