Governance-conditioned effects of climate finance on environmental sustainability in Sub-Saharan Africa

Introduction: Balancing environmental sustainability with economic growth remains a central policy challenge in Sub-Saharan Africa (SSA), where climate finance is increasingly positioned as a key instrument for enabling climate-resilient development. Despite rising global commitments, the environmental effectiveness of climate finance in the region remains unclear. Materials and methods: This study examines the impact of climate finance on environmental sustainability, proxied by the load capacity factor (LCF), using panel data for 40 SSA countries over the period 2010–2023. Results: Employing the System Generalised Method of Moments (SGMM), the results indicated that climate finance did not exert a statistically significant independent effect on environmental sustainability. However, its interaction with governance quality was positive and significant, suggesting that the effectiveness of climate finance is conditional on institutional strength. Economic growth, exchange rate depreciation, and foreign direct investment were associated with environmental deterioration, while population showed a positive relationship with LCF. Robustness checks using Driscoll–Kraay standard errors provided weaker but directionally consistent support. Conclusions: The findings suggest that climate finance alone is insufficient to drive environmental improvements unless supported by strong governance frameworks.