Meeting climate targets implies rapid decarbonisation and a substantial increase in renewable energy (RE) investment and deployment. The financial system plays a key role in mobilising these investments. To support these efforts and address related climate risks, financial regulators and central banks increasingly adopted green financial and monetary policies (GFMP). However, empirical evidence on the effectiveness of GFMP remains scarce. This paper sheds light on the impacts of GFMP on RE capacity additions. I construct a country-level GFMP index across 26 countries for the years 2000 to 2023. Leveraging this index, I deploy two-way fixed effects and quantile panel regressions to quantify aggregate and policy type-specific impacts, and estimate heterogeneous conditional effects. Results show a positive relationship between GFMP intensity and RE capacity additions. On average, each adopted GFMP is associated with an addition of 1.12 gigawatt RE capacity over the long-term. I find positive effects for incentive-based instruments, but not for informational instruments. The size of effect shows heterogeneity, suggesting that countries with relatively more mature RE markets experience larger benefits from GFMP. This study provides an early empirical quantification of GFMP impacts on the energy transition, and presents a GFMP index that can be deployed in future research.
