GREEN CAPITAL: HOW ENVIRONMENTAL PERFORMANCE SHAPES FOREIGN DIRECT INVESTMENT (FDI) INFLOWS
Abstract
Sustainable economic transition demands a clear comprehension of the environmental influence on foreign direct investment (FDI) inflows since emerging and middle-income economies need green growth models. This study investigates the impact of key environmental and institutional indicators CO₂ emissions per capita, renewable energy consumption, political stability, and environmental regulation on FDI inflows (% of GDP) across multiple countries from 2000 to 2023. The study adopts a descriptive-analytical quantitative research design to use panel data regression methods through Stata software based on Excel-built standardized datasets. The research establishes linear relationships between variables while it applies standardized data across countries for universal comparison under specified time periods and governance measurement constraints. The research findings reveal that better environmental legislation coupled with increased renewable energy adoption results in increased FDI inflows but CO₂ emission levels produce negative effects on FDI. The results demonstrate that political stability demonstrates a moderate positive relationship with the model. The research results validate previous findings which demonstrate how environmental and governance standards affect investment climate (Globerman & Shapiro, 2002). Clean energy initiatives alongside transparent environmental management schemes lead countries to attract greater amounts of sustainable capital. The integration of environmental and investment strategies by policymakers will lead to better competitiveness in the green global economy.
Keywords: Foreign Direct Investment (FDI), CO₂ Emissions, Renewable Energy, Political Stability, Environmental Regulation, Panel Data Regression, Sustainable Development, Governance Indicators, Green Economy
