The Role of Green Finance in Mitigating the Financial and Economic Impacts of Geopolitical Tensions: An Analytical Study of the Repercussions of the US-Iranian Escalation on the Lebanese Economy

Abstract

This study aims to analyze the role of green finance in mitigating the financial and economic impacts of geopolitical tensions through an analytical examination of the repercussions of the U.S.–Iran escalation on the Lebanese economy. The study is based on the hypothesis that green finance represents a modern financial instrument capable of enhancing economic resilience, diversifying funding sources, and supporting investment in sustainable sectors, thereby reducing the adverse effects of external shocks on fragile economies.

The study adopts a descriptive-analytical approach, drawing on the relevant economic literature and international reports on green finance, in addition to analyzing the effects of the U.S.–Iran escalation on key Lebanese economic and financial indicators, including economic growth, investment, financial stability, exchange rates, the banking sector, and energy security. It also examines the relationship between rising geopolitical risks and declining conventional investment flows, while highlighting the growing importance of green finance instruments—such as green bonds, sustainable investment funds, and financing for renewable energy and sustainable infrastructure projects—as effective mechanisms for strengthening economic resilience in times of crisis.

The findings indicate that geopolitical tensions impose significant burdens on the Lebanese economy by increasing uncertainty, raising financing costs, reducing investment, and intensifying pressure on public finances. Conversely, green finance provides alternative funding sources, stimulates investment in sustainable development projects, and enhances energy security through the expansion of renewable energy, thereby reducing dependence on imported energy and improving the economy's capacity to withstand external shocks. However, the effectiveness of green finance depends on the existence of an appropriate institutional and legislative framework, stable economic policies, and structural reforms that promote transparency, good governance, and the attraction of green investments. The study concludes that expanding the adoption of green finance instruments can serve as a fundamental pillar for supporting Lebanon's economic recovery and achieving sustainable development, particularly in light of continuing regional geopolitical challenges.