Green Financing and Energy Security: Mitigating Geopolitical Risk in a Global Context

Energy security is vital for economic stability and societal well-being. However, adverse geopolitical events have persistently threatened the reliability of the global energy supply. This study examines whether green financing effectively improves energy security and, if so, whether it reduces geopolitical risk, using data from 37 countries between 2013 and 2018. Our analysis also includes an alternative metric of energy security across 36 countries for the extended period of 2013–2022. Our results indicate that green investment can significantly alleviate global energy security challenges. Our heterogeneity analysis reveals that green financing has a greater impact on energy security in OECD (IEA) countries than in non-OECD (non-IEA) countries. The effect of green investment also varies considerably across different levels of energy security, according to the panel quantile regression results. This study finds a V-shaped relationship for green financing, meaning nations at both high and low energy security risk benefit most. Notably, green financing moderates the link between energy security and geopolitical risk, acting as a buffer against the harmful effects of rising geopolitical risk. Our findings remain robust across multiple estimation approaches and withstand tests for endogeneity. These results have important policy implications.