Sustainable finance versus non-sustainable finance and environmental sustainability: evidence from selected OECD economies

This study aims to examine the role of sustainable finance vs. nonsustainable finance in environmental sustainability using OECD nations from 2012 to 2023. Surprisingly, the data characteristics provide a clear guide to choose an appropriate set of estimators. For instance, all variables are integrated at first difference, which compels this study to adopt the Johnson cointegration approach. In addition, to address cross-sectional dependence and serial correlation problems, this study employs the Driscoll-Kraay Standard Error estimator. To break the suspense, this study considers total factor productivity, urbanization, technology (including information & communication technology and artificial intelligence), green innovation, public‒private partnerships (PPPs), sustainability, and nonsustainable finance as environmental determinants. The obtained results remain fascinating for the specified nations. For instance, outcomes reveal an inverse relationship between total factor productivity, urbanization, and green innovations with carbon emissions. In addition, information and communication technology, artificial intelligence, and public‒private partnerships contribute to emissions. Similarly, sustainable finance (SF), including green bonds and green foreign direct investment, plays a significant role in addressing environmental issues. In contrast, nonsustainable finance increases emissions, except for financial stability and financial efficiency. Additionally, this study offers a moderate effect of SF on PPPs and green innovations, which does not support the sustainability theme. A heterogeneity view yields awe-inspiring results concerning environmental proxies, including CO2 emissions, ecological footprint, and load capacity factor. Finally, cross-country analysis describes fascinating outcomes under the proposed theme. Regarding outcomes, the present study offers imperative implications for becoming clean and green shortly.