article · Energy & Environment
An evaluation of Brazil, Russia, India, China, and South Africa from 2005 to 2019 investigates how financial development affects environmental quality. Using composite indices for both financial development and environmental quality, econometric models examine dynamic interactions alongside agricultural activities, economic growth, renewable energy, and non-renewable energy consumption. The findings demonstrate that composite financial development reduces environmental degradation and enhances environmental quality. Conversely, agricultural activities exacerbate environmental deterioration. The analysis also confirms an inverted U-shaped Environmental Kuznets Curve relationship between economic growth and environmental quality across these emerging economies. Furthermore, the adoption of renewable energy delivers environmental improvements, whereas non-renewable energy consumption intensifies environmental harm. These insights indicate that directing the financial sector towards green energy initiatives supports environmental stability across BRICS member nations.
Balancing economic expansion with sustainability is a critical challenge for emerging global economies. By demonstrating that financial development and renewable energy contribute positively to environmental quality, this research offers empirical guidance for policymakers. It highlights the necessity of aligning financial sector resources with green energy transitions and addressing the environmental impacts of intensive agricultural practices to achieve sustainable long-term growth.
The abstract does not indicate a direct commercial application pathway or technological product. Instead, it provides macroeconomic evidence that could be used by financial institutions and policymakers seeking to structure green finance frameworks or sustainability-focused investment funds. Because the findings are based entirely on econometric analysis of national-level historical data, any application remains at an early policy and strategy formulation stage.
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This study is significant because it fills the gap in future literature by looking at the panel of 5 Brazil, Russia, India, China, and South Africa (BRICS) economies regarding the important role of financial development (FD) in environmental deterioration under the holistic measures of FD and environmental quality, something that has been largely overlooked in preceding studies. Consequently, this study explores the environmental effects of FD, employing a composite environmental quality proxy (CEQP) and a composite FD proxy (CFDP). In pursuit of this objective, the continuously updated fully modified (Cup-FM) and continuously updated bias corrected (Cup-BC) procedures are applied. These procedures enabled us to comprehensively explore the dynamic interactions between the combined index for FD and CEQP controlling agricultural activities, economic growth, renewable energy consumption, and nonrenewable energy consumption (NREC) in the panel of 5-BRICS economies from 2005 to 2019. The empirical results show that CFDP appeases environmental deterioration and thus improves environmental quality. The agricultural activities intensify environmental deterioration. The analysis also reveals a U-shaped relationship between the CEQP and economic growth (inverted U-type environmental Kuznets curve hypothesis) for the BRICS nations. Additionally, renewable energy improves environmental quality, whereas NREC decreases it. As supported by the results of the study, BRICS policymakers should encourage the financial sector to support green energy initiatives and achieve environmental stability.
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DOI: 10.1177/0958305x241270216
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