The diverse nature of financial institutions’ development in environmental degradation: evidence from developed economies

Rahman, Sami Ur; Khan, Muhammad Ibrahim; Hussain, Javed G.; Salia, Samuel

The diverse nature of financial institutions’ development in environmental degradation: evidence from developed economies

Rahman, Sami Ur and Khan, Muhammad Ibrahim and Hussain, Javed G. and Salia, Samuel (2026) The diverse nature of financial institutions’ development in environmental degradation: evidence from developed economies. Journal of Economic Studies. pp. 1-23. ISSN 0144-3585

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Official URL: https://doi.org/10.1108/JES-01-2026-0014

Abstract

Purpose

This study empirically examines the impact of financial institutions (mutual funds, pension funds, banks and insurance firms) on the ecological footprint of six developed economies.

Design/methodology/approach

Using data from 2001 to 2020, we employed robust econometric techniques, including CS-ARDL, FMOLS, and the Dumitrescu and Hurlin (2012) panel causality test, to estimate the environmental impact of the development of both bank and non-bank financial institutions.

Findings

The findings report that banking development, mutual funds and pension funds reduce the ecological footprint. Whilst the insurance market's development enhances the ecological footprint, it suggests heterogeneous and diverse impacts of financial institutions on environmental quality. On the disintegration of insurance funds, we found that both non-life and life insurance market development increases the ecological footprint (depicted in the Graphical abstract). The findings suggest comprehensive integration of ecological footprint quality in the investment/lending practices of financial institutions to mitigate environmental degradation in developed economies.

Originality/value

This study is the first of its kind to explore the impact of both financial (banks) and non-financial institutions' development on environmental degradation.

Item Type:	Article
Identification Number:	10.1108/JES-01-2026-0014
Dates:	Date Event 3 June 2026 Accepted 19 June 2026 Published Online
Uncontrolled Keywords:	Ecological footprint, Insurance market, Pension funds, Mutual funds, Banking development
Subjects:	CAH15 - social sciences > CAH15-02 - economics > CAH15-02-01 - economics
Divisions:	Business School > Accountancy, Finance and Economics
Depositing User:	Gemma Tonks
Date Deposited:	30 Jun 2026 13:04
Last Modified:	30 Jun 2026 13:04
URI:	https://www.open-access.bcu.ac.uk/id/eprint/17095