<p>This study examines the relationship between green finance (GF) and sustainable development (SD), with a particular emphasis on the moderating role of gross domestic product (GDP) and key country-specific characteristics. Using panel data from 19 countries between 2000 and 2021, we employ an Ordinary Least Squares (OLS) regression to assess the baseline relationship. The results confirm that green finance positively influences sustainable development; however, GDP does not significantly moderate this relationship across the overall sample. To deepen the analysis, we further examined the moderating effect of GDP by incorporating country-specific characteristics—particularly Foreign Direct Investment (FDI) levels—as a dummy variable that separates countries into high- and low-FDI groups. This indicates that green finance has a positive effect on sustainable development, and GDP plays a positive moderating role—but only in environments where FDI levels are sufficiently high. These findings suggest that FDI is not only a source of external capital but also a proxy for a country’s absorptive capacity, enhancing its ability to channel green finance toward innovation and substainable long-term outcomes. Furthermore, the heterogeneity analysis shows that FDI levels generally correspond with income status. High-income countries, with greater FDI inflows, demonstrate stronger GF–SD outcomes, while green finance is also effective in lower-middle-income countries. In contrast, its impact is limited in upper-middle-income nations, likely due to policy and structural constraints. These findings provide important implications for policymakers: the effectiveness of green finance depends not only on financial availability but also on a country’s structural and economic readiness—particularly its FDI levels and income status. Therefore, customized green finance strategies that align with national absorptive capacity and development stages are essential to maximize sustainable outcomes.</p>