Eco‐Innovation in Asia: The Interplay of Clean Energy, Smart Policies and Global Finance in Sustainable Development

ABSTRACT Environmental recovery presents a significant global challenge for both developed and emerging economies. In Asia, policymakers are formulating and implementing strategies to achieve environmental sustainability without compromising long‐term economic advancement. This study investigates the impacts of financial, economic, technological and green energy factors on the sustainable growth of Asian economies. Applying the Cross‐Sectionally Augmented Autoregressive Distributed Lag method, the findings reveal that financial globalization (FNGL) and renewable energy consumption both contribute to reducing environmental degradation. The negative effect of FNGL is more pronounced in developed Asian nations, whereas the beneficial impact of renewable energy is statistically more significant in developing economies. Conversely, economic expansion adversely affects environmental sustainability across both developed and developing Asian countries. Furthermore, technological innovation and urbanization significantly influence ecological footprints in both panels. Urbanization is found to be environmentally detrimental in developed nations but beneficial in emerging economies. Robustness checks using Fully Modified Ordinary Least Squares and Dynamic Ordinary Least Squares models corroborate these conclusions. The study affirms that eco‐friendly policies and financial innovation are crucial in mitigating environmental degradation and fostering sustainable development in the region.