Financial Innovation and Ecological Balance: A Quantile Analysis of the Load Capacity Factor in OECD Countries

Achieving sustainable development requires moving beyond pollution metrics to holistic measures, such as the load capacity factor (LCF), which balances ecological demand and supply. While recent studies have provided important insights into the determinants of LCF in OECD countries, further research is needed to incorporate additional determinants and updated estimation approaches. This study addresses this gap by examining the impacts of financial innovation, forestry, urbanization, population, and economic growth on the LCF in Organization for Economic Cooperation and Development (OECD) economies from 1990 to 2023. Using second-generation panel econometric methods, including tests for cross-sectional dependence, slope heterogeneity, second-generation unit roots, and cointegration techniques, this paper confirms a stable long-run relationship among the variables. The core analysis applies the method of moments quantile regression to uncover the heterogeneous effects across the LCF distribution. The results indicate that financial innovation consistently enhances the ratio of biocapacity to ecological footprint. In contrast, economic growth and urbanization exert significant negative pressure on the LCF, whereas population size shows a uniformly detrimental effect. Forestry has a positive but less pronounced influence. Robustness checks using fully modified ordinary least squares, dynamic ordinary least squares, and panel-corrected standard errors confirm these results. The present study concludes that targeted financial innovation and stringent urban demographic policies support OECD nations in improving ecological balance and reducing ecological deficits.