Effects of green finance and financial innovation on environmental quality: new empirical evidence fromAfrica’s countries

Purpose This study examines the role of financial innovation and green finance in improving environmental quality in Africa. Given the continent’s rapid economic growth and rising energy demand, environmental degradation has intensified, yet the financial sector’s potential contribution to sustainability remains underexplored. Design/methodology/approach The analysis covers 35 African countries over the period 2000–2019. The cross-sectionally augmented autoregressive distributed lag model is employed to capture both short- and long-run dynamics while accounting for cross-sectional dependence. Disaggregated data on renewable energy projects are used to provide more accurate insights. Findings The results indicate that financial innovation and green finance significantly reduce carbon dioxide emissions in the long run. In addition, green finance has an immediate short-term mitigating effect on emissions, highlighting its dual role in both immediate and sustained environmental improvement. Research limitations/implications The study is limited to available data up to 2019 and may not fully capture postpandemic financial–environmental dynamics. Practical implications The findings suggest that policymakers should strengthen green finance frameworks, set renewable energy investment targets and enhance climate risk disclosure to ensure sustainable finance practices. Social implications By promoting finance-driven mechanisms for sustainability, this research supports the achievement of several Sustainable Development Goals, particularly those related to clean energy, climate action and sustainable growth. Originality/value This study contributes to the literature by filling a regional gap in green finance and environmental sustainability in Africa. It emphasizes the dynamic environmental effects of financial innovation under different regulatory frameworks and integrates the analysis with renewable energy project financing.