Sustainable Finance, Climate Vulnerability, and Gendered Productivity Losses: Evidence from Heat Stress Exposure and Institutional Adaptive Capacity in Emerging Economies

Abstract

This study examines the role of sustainable finance in mitigating climate-induced gendered productivity losses in emerging economies. Using a balanced panel of 38 emerging countries over the period 2000–2024, the study analyzes how heat stress exposure affects female labour productivity and whether sustainable finance (green finance and ESG investment) and institutional adaptive capacity moderate these effects. The empirical strategy employs Panel ARDL (PMG), System GMM, and CCEMG estimators to address heterogeneity, endogeneity, and cross-sectional dependence. The results indicate that heat stress significantly reduces female labour productivity, particularly in climate-sensitive and informal sectors. Sustainable finance demonstrates a statistically significant positive effect on productivity, suggesting its role in enhancing climate resilience through efficient capital reallocation. Institutional adaptive capacity further strengthens this effect by improving policy implementation and environmental governance. Interaction results confirm that both ESG investment and institutional quality significantly mitigate the adverse productivity effects of climate stress. The findings highlight that climate vulnerability is not only an environmental issue but also a financial and institutional challenge with strong gendered implications. The study contributes to the literature on climate economics, sustainable finance, and gender inequality by providing integrated empirical evidence from emerging economies. Policy recommendations emphasize strengthening ESG frameworks, expanding green finance instruments, and improving institutional governance to reduce climate-induced gender disparities.

Keywords: Sustainable Finance; ESG Investment; Climate Vulnerability; Heat Stress; Gendered Productivity; Institutional Quality; Emerging Economies