Impact of ESG-Linked Investment Banking on Employment Generation and Poverty Reduction in Emerging Economies

Abstract

In this study, we look at the transformative role of ESG-based investment banking in employment generation and poverty reduction in developing country settings. There, as nations with high investment needs are having to battle the double battle of industrialization and climate crisis, banks are moving to “purpose-driven” capital allocation to plug short funding. Given the recent empirical research (2023 to 2025), we explore two principal ways: a correlation of ESG investment fund flows and job creation, and the role played by the pillar that is socially based for multidimensional poverty solving. We find that there is a high level of positive correlation (r) for economic activity in SME and renewable energy sectors for green bond issuance, leading to a lot of formal employment at its start. Despite the challenges of standardized reporting and initial compliance expenses, this study shows that ESG-integrated banking is a key enabler of inclusive growth. Investment banking can’t exist as a long term profit industry alone; a stable economy and poor countries alone means investment banking needs to connect and support the Global South economy for the longer run, sustainable finance and investment banking (Investing in the Sustainable Community) in order to lead them into this direction in every aspect of the globalization.