Sustainable development goals in emerging markets: Aligning the role of financial inclusion in promoting environmental quality of the Next‐11 economies

Abstract Pursuing sustainable development has emerged as a paramount global objective, with the United Nations' Sustainable Development Goals (SDGs) serving as a guiding framework. Increasing environmental degradation is associated with increased greenhouse gas emissions, deforestation, industrial waste, fossil fuel depletion, and loss of biodiversity. This study has analyzed the effect of financial inclusion on ecological sustainability while controlling the effect of financial development, energy consumption, economic growth, urbanization, and trade openness in the Next‐11 economies from 1995 to 2019. The study develops the financial inclusion index through principal components analysis by inculcating three demand‐side and three supply‐side factors of financial inclusion. To analyze the developed model, various first‐generation and second‐generation techniques are applied. The results of Westerlund co‐integration reveal significant long‐run co‐integration among the series. The long‐run elasticities are estimated through dynamic common correlated effect estimation and generalized method of moments where results reveal that FI helps to secure environmental sustainability by reducing the ecological footprint, hence it works on the SDG framework. Economic growth and financial development are found to be the root causes of increasing ecological footprint. So, it is the penetration of excessive credit, not the financial inclusivity which needs to be directed toward sustainability. It is suggested that the governments of Next‐11 countries should steer the capital toward sustainable usage and should continue facilitating financial services to curtail environmental degradation. Our findings have significant repercussions for Next‐11 countries, giving decision makers fresh perceptions of financial inclusion and development implications.