Role of green finance, environmental regulations, and economic development in the transition towards a sustainable environment

The critical issue of environmental sustainability is among the top priorities of sustainable development goals (SDGs) and the conference of parties (COP) 26. This study extensively analyzes the impact of green finance (GF), renewable energy, environmental regulations, and carbon finance towards environmental sustainability using panel dataset of 70 countries from 2012 to 2020. Generalized method of moments (GMM) is used to sidestep the matter of endogeneity. First, a novel index is developed by combining several indicators of green finance to measure its impact on environmental sustainability by lowering CO2 emissions. The results show a significant impact of green finance as well as renewable energy on environmental sustainability, whereas the effect of carbon finance is insignificant. Second, the moderating role of environmental regulations, devised by Nationally Determined Contributions (NDC) policies, between GF and CO2 emissions shows the importance of these regu-lations in moving towards a sustainable environment. Finally, this study examined the Environmental Kuznets Curve (EKC) of 70 countries and confirmed the presence of an inverted U-shape curve. The results confirm the significance of green finance as an indicator in EKC fitting, thus, supporting its importance. This study recom-mends long-term green finance projects and implications of environmental regulations to ensure environmental sustainability.