Sustainable finance and energy poverty : empirical insights from Asia-Pacific countries

Abstract

Energy poverty, defined as the proportion of the population without access to electricity, is a multidimensional challenge that hinders sustainable development in the Asia-Pacific region. This study empirically examines how sustainable finance, proxied by renewable energy investment, can contribute to reducing energy poverty levels in 38 countries in the Asia-Pacific region during the period 2016–2025. By combining the Green Finance Transmission Framework (GSPE) and the STIRPAT model, this study applies panel data regression and tests the mediating mechanism of renewable energy consumption, along with control variables such as GDP per capita, foreign direct investment (FDI), and urban population. The results indicate that sustainable finance has a significant direct impact on reducing energy poverty. However, interestingly, the mediating mechanism through renewable energy consumption is statistically significant, suggesting that the impact of sustainable finance on energy is always channeled through increased clean energy consumption, and there may be constraints in terms of adoption, distribution, or energy infrastructure. Additionally, GDP per capita significantly accelerates the reduction of energy poverty, but this finding differs from previous studies as it shows that in Asia-Pacific countries, income growth is more effective when accompanied by good energy governance. Meanwhile, FDI does not show a significant effect, suggesting that foreign capital flows have not been optimally directed toward inclusive energy sectors or remain concentrated in carbon- intensive sectors. Interestingly, urbanization actually exacerbates energy poverty in the short term, highlighting infrastructure disparities in rapidly growing urban areas. These findings are validated through robustness tests using a first-difference approach and clustered standard errors. Overall, this study enriches the literature on the relationship between sustainable finance and energy justice, emphasizing the importance of designing financial policies that target social impacts, not just environmental aspects. This research also provides empirical foundations to support the achievement of SDG 7 (Affordable and Clean Energy) and SDG 13 (Climate Action) in the Asia- Pacific region.