The Evolution of Sustainable Investment: The Role of Decentralised Finance and Green Bonds in the Efficiency and Transparency of Green Finance

Abstract

Green finance is a cornerstone of sustainable investment, but it highlights the critical importance of transparency, traceability and financial efficiency within an environmental, social and governance (ESG) framework. This review article examines the potential of green finance as a pillar for accelerating investment in sustainable pathways, particularly using green bonds and the innovative mechanisms offered by decentralised finance (DeFi). Green bonds are highlighted as a key instrument for channelling capital towards green projects, while DeFi is explored as an innovative tool with the potential to democratise access to finance and enable micro-investments in sustainability projects with a relevant social impact. This article examines both mechanisms in terms of their ability to increase the efficiency and reliability of green finance ecosystems. The analysis also explores emerging challenges such as regulatory constraints, the threat of greenwashing, and technological limitations associated with the implementation of blockchain and artificial intelligence. By addressing these barriers, the article provides strategic recommendations for achieving greater transparency and reliability in green finance markets, thereby fostering investor confidence and broader market growth. It also identifies research gaps and proposes new avenues to advance the integration of sustainable finance, ensuring its scalability and inclusion in the promotion of global sustainability.

Received: 16 November 2024| Revised: 17 February 2025| Accepted: 27 February 2025

Conflicts of Interest

The author declares that she has no conflicts of interest regarding this work.

Data Availability Statement

Data sharing is not applicable to this article as no new data was created or analyzed in this study.

Author Contribution Statament

Natália Teixeira: Conceptualization, Methodology, Investigation, Writing – original draft, Writing – review & editing, Visualization, Funding acquisition.