Testing the role of financial stability and globalization in G-7 countries amidst environmental sustainability efforts: New evidence from MMQR analysis and load capacity factor

Financial stability and the incorporation of national financial systems into international capital markets have increasingly been viewed as vital elements influencing environmental performance. More recently, the principle of ecological sustainability has received increasing attention, especially through the growth of broader factors that reflect the balance between ecological pressure and existing natural capacity. This study aims to fill the research gap by examining how financial stability and financial globalization, that assessed using overall indices as well as their de facto and de jure aspects, contribute to ecological sustainability in G7 economies. To measure environmental performance, we employ the load capacity factor (LCF), a comparatively new measure that connects a country's ecological footprint to its biocapacity, thus providing a more extensive understanding of environmental sustainability than traditional dimensional measures. To explore these associations, the study employs the Method of Moments Quantile Regression (MMQR) over the period 2000–2021, enabling us to determine how the impacts vary across different levels of environmental performance. Findings reveal that financial globalization improves LCF across all quantiles, with de facto FG exerting stronger effects than de jure FG. Critically, financial stability demonstrates positive and statistically significant effects on LCF across all quantiles, confirming that financial resilience supports ecological sustainability. Renewable energy consumption also enhances LCF across all quantiles, while GDP exhibits negative effects . As a result, the paper addresses policy implications designed to improve environmental sustainability in advanced economies. • Examines the effects of financial stability and financial globalization on ecological sustainability in G7 countries. • Employs the Load Capacity Factor (LCF) as a comprehensive measure of environmental sustainability. • Uses Method of Moments Quantile Regression (MMQR) to capture heterogeneous effects across sustainability levels. • Finds that both de facto and de jure financial globalization enhance ecological sustainability. • Shows that financial stability and renewable energy consumption improve environmental performance. • Provides policy insights linking financial system quality to sustainability outcomes.