Impact of Banking and Financial Systems on Environmental Sustainability: An Overarching Study of Developing, Emerging, and Developed Economies

Sandra Chukwudumebi Obiora, Olusola Bamisile, Evans Opoku-Mensah and Adasa Nkrumah Kofi Frimpong
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Sandra Chukwudumebi Obiora: School of Management and Economics, University of Electronic Science and Technology of China, No. 2006, Xiyuan Ave, West Hi-Tech Zone, Chengdu 611731, China
Olusola Bamisile: School of Mechanical and Electrical Engineering, University of Electronic Science and Technology of China, No. 2006, Xiyuan Ave, West Hi-Tech Zone, Chengdu 611731, China
Evans Opoku-Mensah: School of Management and Economics, University of Electronic Science and Technology of China, No. 2006, Xiyuan Ave, West Hi-Tech Zone, Chengdu 611731, China
Adasa Nkrumah Kofi Frimpong: School of Management and Economics, University of Electronic Science and Technology of China, No. 2006, Xiyuan Ave, West Hi-Tech Zone, Chengdu 611731, China

Sustainability, 2020, vol. 12, issue 19, 1-21

Abstract: In recent years, the developed, emerging, and developing economies have prioritized environmental sustainability attainment. In an attempt to offer some potential policy choices towards the achievement of sustainable development, this paper shifts emphasis from the popularly discussed economic development and carbon emissions nexus. Instead, we examine the impact of the banking and financial system’s activities on carbon emissions for a sample of 45 countries. These are comprised of developed, emerging, and developing countries between 1990 and 2017. To fill the gap in the literature, the nexus is examined in seven different phases. This study exposes robust and reliable empirical results with the use of Feasible General Least Squares, random effects with regards to the Durbin–Wu–Hausman test, and Difference General Method of Moments panel data estimation models. Our findings indicate that the increase of domestic credit to the private sector and commercial bank lending consistently contributes towards aggravated carbon emissions in all economic types. Additionally, increased deposit rates in developing economies, increased lending rates in developed economies, and increased deposit rates in emerging economies contribute towards the overall reduction of carbon emissions. The decrease in lending to high GHG emitting members of the private sector by financial institutions in all economies is recommended based on the results of this study.

Keywords: environmental sustainability; banking and financial system; developed economies; emerging economies; developing economies (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:12:y:2020:i:19:p:8074-:d:422009

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