article · Heliyon
An analysis of EU-27 member states between 2006 and 2019 assesses the effects of private and public credit to small and medium enterprises on inclusive growth and environmental sustainability. Across the European Union, enterprise activities significantly contribute to environmental pollution. However, the environmental consequences of funding these enterprises depend on national economic conditions. In countries with inclusive growth, credit provided by both private institutions and state-owned enterprises supports positive environmental outcomes alongside business growth. In contrast, in nations without inclusive growth, private credit still promotes environmental sustainability, but funding from state-owned enterprises intensifies the harmful environmental impacts associated with small enterprise growth. These results suggest that public financing mechanisms in less inclusive economies may inadvertently worsen environmental damage unless targeted appropriately.
Funding small enterprises is central to European economic and climate strategies, yet financial support does not yield uniform ecological outcomes. Demonstrating that state-backed financing can accelerate environmental degradation in less inclusive economies underscores the need for policymakers and lenders to align public capital allocation with regional social and environmental conditions.
The abstract does not indicate a commercialisation pathway or direct technology transfer application, focusing instead on macro-level policy and econometric analysis of public and private credit allocation across member states.
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At the heart of the EU cohesion policy and the European Green deal lies the underlying sub-goals not limited to; financing the transition, promoting economic well-being of regions, take everyone along, achieving climate neutrality and a zero pollution Europe which the small and medium enterprises positions as the perfect conduit to achieve the aforementioned sub-goals in the case of Europe. Our study seeks to investigate if credit flowing from private sector units and government-owned enterprises to SMEs guarantees inclusive growth and environmental sustainability in EU-27 member states using data collected from OECD Stat. Database and the World Bank database from 2006 to 2019. Findings from the econometric analysis shows that SMEs activities is a significant and positive predictor of environmental pollution in the EU. In the case of inclusive growth countries cohort in the EU, both credit flowing from private sector funding institutions and government-owned enterprises to SMEs enhances a positive SME growth impact on environmental sustainability. In the case of non-inclusive growth countries cohort in the EU, credit flowing from private sector to SMEs enhances the positive impact of SME growth on environmental sustainability while credit flowing from government-owned enterprises to SMEs intensify the negative impact of SME growth on environmental sustainability.
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DOI: 10.1016/j.heliyon.2023.e15095
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