The drivers of environmental sustainability in BRICS economies: Do green finance and fintech matter?

The drivers of environmental sustainability in BRICS economies: Do green finance and fintech matter?
Authors: Maxwell Chukwudi Udeagha & Nicholas Ngepah
Journal: World Development Sustainability
Volume: Volume 3
Published: December 2023

This study examines how green finance (GFN) and financial technology (fintech) contribute to environmental sustainability in BRICS countries from 2000 to 2018. It also considers the roles of energy innovation, economic growth, and natural resource rents. The findings indicate that both green finance and fintech positively influence environmental quality, while economic growth and natural resource rents tend to have negative effects. Energy innovation is shown to enhance environmental performance, and the results support the Environmental Kuznets Curve hypothesis, suggesting that environmental quality initially declines as income grows but improves beyond a certain level. The study also finds bidirectional causality between CO2 emissions and green finance, fintech, and natural resource rents, whereas GDP and energy innovation exhibit unidirectional causality with emissions.

In terms of policy implications, the research highlights the need for BRICS governments to strengthen regulatory frameworks for green finance, ensuring transparency and promoting green financial instruments such as bonds, loans, and investment funds. Fintech policies should encourage responsible innovation, support digital payment systems, and facilitate sustainable investing, including impact and socially responsible investments. Energy innovation policies should include ambitious renewable energy targets, incentives for clean energy projects, streamlined regulatory processes, and increased funding for research and development. Regarding natural resource management, governments are encouraged to implement sustainable extraction practices, enforce environmental standards, conserve ecosystems, and promote renewable alternatives. Finally, the study emphasizes that economic growth strategies should integrate environmental considerations, with strong monitoring and compliance mechanisms to balance development and sustainability.

Overall, the study underscores that coordinated efforts across finance, technology, energy, and resource management are essential for BRICS countries to achieve sustainable environmental outcomes while supporting economic development.