Abstract This study comprehensively reviews the relationship between green finance and sustainable development, specifically focusing on combatting climate change and achieving carbon neutrality. Utilizing a narrative review methodology, the study examines a range of scholarly articles and publications to identify key themes, findings, and future directions in green finance. The review emphasizes the crucial role of substantial investments in green and low-carbon initiatives to address climate change effectively and promote sustainable economic growth. It highlights the necessity of robust regulatory frameworks that facilitate the availability of green finance and the integration of carbon–neutral practices. Additionally, the paper explores the potential of impact investing, wherein investors accept lower financial returns in exchange for non-financial benefits in green finance. It underscores the influential role of institutional ownership in guiding companies toward enhanced environmental and social performance. Moreover, integrating environmental, social, and governance (ESG) factors in investment decisions is critical for sustainable finance. Addressing the intersection of climate change and risk management, the review highlights the implications of environmental risks on financial decision-making. Effective communication strategies can raise public awareness and support for climate policies. The study concludes by calling for collaboration, further research, and policy measures to advance green finance and foster sustainable economic growth. It recommends aligning financial incentives with sustainable outcomes, fostering transparency, and incorporating social equity in green finance initiatives to contribute towards achieving sustainable development goals and promoting a greener future.
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