Green finance in circular economy: a literature review

Environ Dev Sustain. 2023 May 17:1-41. doi: 10.1007/s10668-023-03361-3. Online ahead of print.


Developing markets are using sustainable development potential to reach zero-carbon goals. Due to the limitation of natural resources, companies need to use environmentally friendly manufacturing to develop a circular economy (CE). Green finance (GF) and the CE are linked in a systematic and complex approach; therefore, it was essential to employ the coupling coordination-level framework to explain their relationship and feedback. Any study linking green financing and CE together has been found. The objective of this research is to explore this twofold domain and determine its main characteristics. To address this objective, a comprehensive review of the literature was conducted, supplemented by a bibliometric analysis. The results confirm that GF has the potential to help society, sustainability, and the prevention to climate shifts, investing in the CE. There are many hurdles to overcome, including inadequate knowledge about CE and GF, ambiguous definitions, a lack of coherence between legal frameworks on CE and green financing, unclear laws, and a lack of financially viable motivation for investors and financial institutions that are ready to promote in sustainability. This study explores CE and GF domains. Managers may readily increase their understanding of methods, strategies, and technical solutions beneficial to assist their operations toward a green economy depending on various CE and GF elements. Finally, based on a categorization of GF types, the assessment identifies future investment potential consequences of green financing in the CE.

Keywords: Circular economy; Circular supply chains; Green finance; Nexuses; Responsible production and consumption; Sustainable finance.

Publication types

  • Review