Analyzing the nexus between green finance, green production practices, and environmental quality in an Era of geopolitical uncertainty

Abstract

Achieving carbon neutrality targets through environmentally friendly initiatives and green financing has become a global focus. This study examined the impact of economic growth, green finance, geopolitical risk, green production practices, and urbanization on carbon emissions in the context of G7 economies for the time period of 1994–2020. Using a panel quantile regression method, the study captured heterogeneous environmental impacts of explanatory factors. Findings reveal that economic growth has a positive impact on carbon emissions. However, this impact is low in upper quantiles. Green finance has a negative relationship with carbon emissions, depicting the supportive role of green financing to achieve environmental sustainability. Geopolitical risk shows adverse environmental outcomes, which calls for geopolitical stability to avoid disruptions in implementing green initiatives. Results show a negative link between green production practices and carbon emissions, validating the pivotal contribution of ecologically sustainable manufacturing activities to enhance environmental quality in G7 nations. Conversely, urbanization has a positive impact on carbon emissions, emphasizing the need for greener urban planning strategies. In light of these empirical outcomes, we recommend fostering green finance (SDG-12), implementing green production practices (SDG-9), curbing geopolitical risks (SDG-16), enhancing environmentally sustainable economic growth (SDG-8), and improving green urban planning strategies (SDG-11) for advancing carbon neutrality (SDG-13) in G7 economies.