Bridging the Gap: Financial Inclusion's Role in Environmental Sustainability in Pakistan

Abstract

Purpose: The global impact of climate change on both human well-being and the environment has garnered widespread attention. Depending on the context, financial inclusion can either help people adapt to changing conditions or lessen the impact of those changes. The purpose of our research is to fill that study gap. While improved financial infrastructure is excellent for GDP, the only way to save the planet for both emerging and rich nations is through effective governance. This research looked at how different variables, such as financial inclusion (FINC), FDI, trade openness (TO), and economic growth (GDP), affects Pakistan's CO2 emissions and ecological footprint from 2004 to 2021. Design/Methodology/Approach: Autoregressive distributed lag modeling (ARDL) is used to calculate the estimated alliance between the research variables. Findings: Even if GDP and FDI play important roles in environmental quality, long-run ARDL estimates show that FINC and trade have a negative influence on carbon dioxide emissions. On the other side, FINC has a beneficial effect on the environment, reducing its negative impact and improving environmental quality. Implications/Originality/Value: These outcomes indicated that Pakistan needs to enhance trade and FINC to sustain environmental quality. The funds issued from the financial institutions should be allocated to clean and green energy projects.