Bridging the green gap: Do green finance and digital transformation influence sustainable development?

Abstract

Understanding the complex socio-economic factors that impact climate change is crucial for developing strategies to reduce their negative environmental impacts. Therefore, the present study explores the association that exists among green finance, digital transformation, and consumption-based carbon emissions, with a specific focus on selected OECD economies from 1995 to 2020. In this study, we have divided digital transformation into two categories, namely digital technology exploration and digital technology readiness. The results of the investigation underscore the key role of green finance in limiting carbon emissions and highlight the role of digital technology readiness in boosting the quality of the environment. In contrast, digital technology exploration positively influences and enhances carbon emissions in OECD economies. Furthermore, the findings also indicate that exports reduce carbon emissions, while imports and economic growth are significantly associated with an increase in carbon emissions. The findings of this study have significant policy implications, advocating for a comprehensive strategy to promote green finance, encourage digital transformation, and support environmentally friendly organizations.