FinTech Investment, Geopolitical-Economic Uncertainty, and CO2 Emissions in Low- and Middle-Income Countries: Evidence from Dynamic Panel Models

Abstract

The intersection of financial innovation and environmental sustainability offers important opportunities for low- and middle-income (LMI) countries. This study examines the association between FinTech investment, geopolitical-economic uncertainty, urbanization, economic development, and carbon dioxide (CO2) emissions in LMI countries. CO2 emissions per capita are used as an environmental outcome indicator rather than as a direct measure of green finance. Using a panel dataset covering 2010–2021, the study applies fixed-effects panel regressions as the main empirical approach and reports one-step difference the Generalized Method of Moments (GMM) estimates as exploratory dynamic evidence. The fixed-effects results indicate that GDP per capita is positively and significantly associated with CO2 emissions, while FinTech investment and urbanization do not show consistent significant associations. Geopolitical risk is positively associated with CO2 emissions in some static specifications, but this association becomes insignificant once gross domestic product (GDP) per capita is included. The exploratory GMM results, estimated with collapsed instruments and restricted lag depth, do not provide statistically significant evidence that FinTech investment is associated with lower CO2 emissions. Overall, the findings suggest that FinTech investment may be relevant for environmental outcomes in LMI countries, but its role is neither automatic nor uniform and remains sensitive to model specification. Policy implications emphasize the need to strengthen digital financial infrastructure, regulatory transparency, institutional stability, urban planning, and climate-oriented investment channels to support FinTech-driven environmental performance.