Do digital finance, governance, and energy efficiency mitigate or worsen environmental degradation? Evidence from belt and road economies

• Digital finance, industry, and energy use drive BRI degradation. • Institutional quality shows mixed impact on environment outcomes. • Green finance and reforms needed for low-carbon BRI strategies. BRI economies face mounting environmental degradation due to rapid industrialization, weak institutions, and inefficient energy use—threatening sustainable development. This study examines the impact of digital finance, institutional quality, industrialization, and energy efficiency on environmental degradation in 20 BRI nations (2014–2023), employing a two-step system GMM estimator as the main approach and Fixed Effects (FE) and Feasible Generalized Least Squares (FGLS) for robustness. The GMM results indicate that all four factors significantly exacerbate environmental degradation, while FE results largely confirm these patterns, with a minor divergence in the role of institutional quality. The addition of FGLS further strengthens the robustness of the analysis, showing consistent and statistically significant effects of industrialization, energy efficiency, digital finance, and institutional quality on worsening ecological outcomes. This study is the first to empirically integrate digital finance into the environmental context of BRI economies while triangulating evidence across GMM, FE, and FGLS. The findings provide new insights into the finance–governance–environment nexus and offer timely policy guidance aligned with COP28, emphasizing the importance of green financial tools, institutional reforms, and low-carbon industrial strategies in emerging markets.