Does Climate Policy Uncertainty Abate Financial Inclusion? An Empirical Analysis Through the Lens of Institutional Quality and Governance

Aamir Aijaz Syed, Sajid Hussain Mirani (), Muhammad Abdul Kamal and Paulo Ferreira
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Aamir Aijaz Syed: Institute of Management, Commerce, and Economics, Shri Ramswaroop Memorial University, Barabanki 225003, India
Sajid Hussain Mirani: Department of Public Administration, Shah Abdul Latif University, Khairpur 66020, Pakistan
Muhammad Abdul Kamal: Department of Economics, Abdul Wali Khan University, Mardan 23200, Pakistan

Sustainability, 2025, vol. 17, issue 2, 1-19

Abstract: Environmental sustainability concerns have led to an increased focus on climate finance, resulting in substantial investments to boost financial sector development. However, recently, climate initiatives have encountered multiple policy uncertainties. This study aims to empirically investigate the impact of U.S. climate policy uncertainty (CPU) on Indian financial inclusion, in addition to exploring the moderating role of institutional quality on the aforementioned relationship. To achieve the above objectives, we first constructed two separate indexes for financial inclusion using the weighted method and principal component analysis. Next, to empirically estimate the above relationship, we employed the two-step system-generalized method of moments (Sys-GMM) and the sequential (two-stage) linear panel data model (SELPDM) on the sample data from 2000–2022. The Sys-GMM estimate test validated that climate policy uncertainty negatively influences India’s financial inclusion. However, institutional regulation and governance assist in moderating the negative influence of U.S. climate policy uncertainty on Indian financial inclusion initiatives. Furthermore, the study also confirmed that various dimensions of institutional regulation and governance exert a positive and significant effect on financial inclusion. Finally, the study validates that economic growth and technological advancement assist financial inclusion initiatives in India. The study is an original work and offers several policy recommendations.

Keywords: climate policy uncertainty; financial inclusion; climate finance; sustainability; institutional regulations (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2025
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