Linking Sustainable Financing Mechanisms to Circular Performance and Competitiveness in Recycled Building Material Manufacturing

Abstract

The study examined the influence of sustainability-linked financial instrumentsspecifically green bonds and sustainability-linked loanson the cost of capital, circular performance, product innovation, and competitiveness of recycled-material manufacturers in Jordan. Positioned within the theoretical frameworks of sustainability-linked finance, the resource-based view, and signalling theory, the research explored how financial mechanisms tied to circular performance indicators enhance both financial and operational outcomes in the manufacturing sector. The study focuses on manufacturers utilizing recycled building materialssuch as recycled steel and construction and demolition (C&D) aggregatesthat form the foundation of sustainable construction practices in emerging markets.A quantitative, explanatory research design was adopted, involving survey data from 89 Jordanian manufacturers using recycled steel, construction aggregates, and other circular materials. Analytical methods included multiple regression, mediation modelling, stochastic simulation of policy scenarios, and machine-learning-driven sentiment analysis to assess investor perceptions. The results indicated that firms utilizing sustainable financing instruments achieved a significantly lower cost of capital, improved circular performance, and higher product innovation levels compared to conventionally financed firms. Circular performance partially mediated the relationship between sustainable financing and competitiveness, while positive investor sentiment strengthened this association. Simulation results further demonstrated that policy incentives such as carbon credits and green credit schemes enhanced financial efficiency and competitiveness under uncertainty.The study concluded that sustainability-linked finance functions not only as a funding mechanism but also as a strategic lever for innovation and competitiveness in circular manufacturing. It provides empirical evidence that financial and environmental objectives can be mutually reinforcing within emerging market contexts such as Jordan.