The Interplay of Digitalization, Green Finance, and Institutional Quality in Overcoming Corruption's Impediments to Environmental Sustainability

ABSTRACT Green finance, digitalization, and institutional quality are fundamental in fostering a green transition for environmental sustainability. However, in the developing nations, corruption impedes the role of green finance and financial development from enhancing environmental sustainability in various ways. Corruption diverts and misappropriates green funds, weakens environmental governance and policy, distorts financial development for green growth, and erodes public trust and institutional capacity. This research examines the role of digitalization and institutional quality in advancing environmental sustainability, as well as addressing how high corruption impedes green finance from advancing a green transition. This research employs longitudinal annual data of the 15 West African economies from 2000 to 2022, which is analyzed with the Driscoll–Kraay method. The robustness of the findings is checked with the “Panel Correlated Standards Error” and “Feasible Generalized Least Square” methods. The research findings support that digitalization, institutional quality, and renewable energy support environmental sustainability. However, corruption impedes green finance and financial development on environmental sustainability in the developing nations. Therefore, this research calls for the developing nations to address the corrosive grip through anti‐corruption measures, capacity building, policy reforms, and international cooperation.