IDEAS home Printed from https://ideas.repec.org/a/wly/natres/v49y2025i2p1081-1107.html
   My bibliography  Save this article

Green policies and financial development in G7 economies: An in‐depth analysis of environmental regulations and green economic growth

Author

Listed:
  • Wenjuan Wang
  • Muhammad Imran
  • Kishwar Ali
  • Abdul Sattar

Abstract

This comprehensive study explores the nuanced relationship between financial development and its determinants within the G7 nations, spanning the years 1990 to 2020. Motivated by the need to understand long‐term financial trends, we meticulously analyze key variables including total natural resource rent, Environmental Policy Stringency Index, total energy consumption, green gross domestic product (GDP), and foreign direct investment inflow. Employing rigorous diagnostic tests to ensure the robustness of our findings, advanced methodologies such as “Method of Moment Quantile Regression,” along with simulations of “Bootstrap Quantile Regression," “Panel Corrected Standard Errors,” and “Feasible Generalized Least Squares” regressions uncover the statistical significance and practical implications of our results. Our pivotal findings carry substantial implications for both individual G7 member states and the collective group. Highlighting a positive correlation between stringent environmental policies, measured by the Environmental Policy Stringency Index, and financial development, our study emphasizes the imperative for these nations to align economic and environmental policies. Striking a harmonious balance between resource management and sustainable environmental regulations not only fosters financial growth but also addresses global environmental concerns. Furthermore, the adverse impact of total energy consumption on financial development underscores the urgent need for G7 nations to prioritize energy efficiency and transition to sustainable sources, aligning with the global trend towards eco‐friendly practices. In response to these critical findings, we propose actionable policy measures. To align with the growing climate crisis and standardize green finance practices, we advocate for the establishment of a jointly funded Climate Resilience and Adaptation Fund and a unified Green Bond Framework within the G7. These measures not only enhance climate resilience and streamline sustainable investments but also demonstrate the G7's collective commitment to a greener and more prosperous future.

Suggested Citation

  • Wenjuan Wang & Muhammad Imran & Kishwar Ali & Abdul Sattar, 2025. "Green policies and financial development in G7 economies: An in‐depth analysis of environmental regulations and green economic growth," Natural Resources Forum, Blackwell Publishing, vol. 49(2), pages 1081-1107, May.
    • Handle: RePEc:wly:natres:v:49:y:2025:i:2:p:1081-1107
    DOI: 10.1111/1477-8947.12424
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/1477-8947.12424
    Download Restriction: no
    File URL: https://libkey.io/10.1111/1477-8947.12424?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Belaïd, Fateh & Youssef, Adel Ben & Lazaric, Nathalie, 2020. "Scrutinizing the direct rebound effect for French households using quantile regression and data from an original survey," Ecological Economics, Elsevier, vol. 176(C).
    2. Cosimo Magazzino & Marco Mele & Fabio Gaetano Santeramo, 2021. "Using an Artificial Neural Networks Experiment to Assess the Links among Financial Development and Growth in Agriculture," Sustainability, MDPI, vol. 13(5), pages 1-15, March.
    3. M. Hashem Pesaran, 2007. "A simple panel unit root test in the presence of cross-section dependence," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(2), pages 265-312.
    4. Muhammad Imran & Abdul Sattar & Md Shabbir Alam, 2022. "Heterogeneous analysis of free trade agreement between Pakistan and China: a policy guideline for CPEC," Journal of Economic and Administrative Sciences, Emerald Group Publishing Limited, vol. 40(1), pages 76-94, December.
    5. Li, Xuetao & Wang, Feilan & Al-Razgan, Muna & Mahrous Awwad, Emad & Zilola Abduvaxitovna, Shamansurova & Li, Zeyun & Li, Jianfeng, 2023. "Race to environmental sustainability: Can structural change, economic expansion and natural resource consumption effect environmental sustainability? A novel dynamic ARDL simulations approach," Resources Policy, Elsevier, vol. 86(PA).
    6. Joakim Westerlund, 2007. "Testing for Error Correction in Panel Data," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 69(6), pages 709-748, December.
    7. Sirin, Selahattin Murat & Yilmaz, Berna N., 2020. "Variable renewable energy technologies in the Turkish electricity market: Quantile regression analysis of the merit-order effect," Energy Policy, Elsevier, vol. 144(C).
    8. Rick van der Ploeg & Anthony J. Venables (ed.), 2015. "The Economics of Resource Rich Economies," Books, Edward Elgar Publishing, number 14103, December.
    9. Kui Wang & Yang Hu & Jing Zhou & Feng Hu, 2023. "Fintech, Financial Constraints and OFDI: Evidence from China," Global Economic Review, Taylor & Francis Journals, vol. 52(4), pages 326-345, October.
    10. Hung, Ngo Thai, 2023. "Green investment, financial development, digitalization and economic sustainability in Vietnam: Evidence from a quantile-on-quantile regression and wavelet coherence," Technological Forecasting and Social Change, Elsevier, vol. 186(PB).
    11. Sha, Zhiping, 2023. "The effect of globalisation, foreign direct investment, and natural resource rent on economic recovery: Evidence from G7 economies," Resources Policy, Elsevier, vol. 82(C).
    12. Sachs,Jeffrey & Schmidt-Traub,Guido & Kroll,Christian & Lafortune,Guillaume & Fuller,Grayson & Woelm,Finn, 2021. "Sustainable Development Report 2020," Cambridge Books, Cambridge University Press, number 9781108994651, Enero-Abr.
    13. Hashem Pesaran, M. & Yamagata, Takashi, 2008. "Testing slope homogeneity in large panels," Journal of Econometrics, Elsevier, vol. 142(1), pages 50-93, January.
    14. Zhang, Feipeng & Xu, Yixiong & Yuan, Di, 2024. "Detecting financial contagion using a new nonparametric measure of asymmetric comovements," International Review of Economics & Finance, Elsevier, vol. 89(PA), pages 284-296.
    15. Jiang, Zhangsheng & Xu, Chenghao, 2023. "Policy incentives, government subsidies, and technological innovation in new energy vehicle enterprises: Evidence from China," Energy Policy, Elsevier, vol. 177(C).
    16. Sachs,Jeffrey & Schmidt-Traub,Guido & Kroll,Christian & Lafortune,Guillaume & Fuller,Grayson & Woelm,Finn, 2021. "Sustainable Development Report 2020," Cambridge Books, Cambridge University Press, number 9781108834209, Enero-Abr.
    17. Xu, Aiting & Qiu, Keyang & Jin, Canyang & Cheng, Caijuan & Zhu, Yuhan, 2022. "Regional innovation ability and its inequality: Measurements and dynamic decomposition," Technological Forecasting and Social Change, Elsevier, vol. 180(C).
    18. Lee, Chien-Chiang & Wang, Chang-song, 2022. "Financial development, technological innovation and energy security: Evidence from Chinese provincial experience," Energy Economics, Elsevier, vol. 112(C).
    19. Kailin Shang & Linfeng Xu & Xuan Liu & Zhengtong Yin & Zhixin Liu & Xiaolu Li & Lirong Yin & Wenfeng Zheng, 2023. "Study of Urban Heat Island Effect in Hangzhou Metropolitan Area Based on SW-TES Algorithm and Image Dichotomous Model," SAGE Open, , vol. 13(4), pages 21582440231, November.
    20. Emeka Nkoro & Aham Kelvin Uko, 2022. "Foreign Direct Investment and Inclusive Growth: The Role of the Financial Sector Development," International Journal of Economic Sciences, European Research Center, vol. 11(2), pages 144-162, November.
    21. Antonio F. Galvao & Gabriel Montes-Rojas, 2015. "On Bootstrap Inference for Quantile Regression Panel Data: A Monte Carlo Study," Econometrics, MDPI, vol. 3(3), pages 1-13, September.
    22. Úbeda, Fernando & Javier Forcadell, Francisco & Suárez, Nuria, 2022. "Do formal and informal institutions shape the influence of sustainable banking on financial development?," Finance Research Letters, Elsevier, vol. 46(PB).
    23. Guo, Junyan & Fang, Hanqing & Liu, Xuexin & Wang, Cizhi & Wang, Yuan, 2023. "FinTech and financing constraints of enterprises: Evidence from China," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 82(C).
    24. Cosimo Magazzino & Fabio Gaetano Santeramo, 2023. "Financial development, growth and productivity," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 51(9), pages 1-20, May.
    25. Shakil, Mohammad Hassan, 2021. "Environmental, social and governance performance and financial risk: Moderating role of ESG controversies and board gender diversity," Resources Policy, Elsevier, vol. 72(C).
    26. Li, Zhipeng & Zhou, Xiaoyu & Huang, Shoujun, 2021. "Managing skill certification in online outsourcing platforms: A perspective of buyer-determined reverse auctions," International Journal of Production Economics, Elsevier, vol. 238(C).
    27. Chen, Yu & Wang, Yuandi & Zhao, Changyi, 2024. "From riches to digitalization: The role of AMC in overcoming challenges of digital transformation in resource-rich regions," Technological Forecasting and Social Change, Elsevier, vol. 200(C).
    28. Koenker, Roger W & Bassett, Gilbert, Jr, 1978. "Regression Quantiles," Econometrica, Econometric Society, vol. 46(1), pages 33-50, January.
    29. Liu, Wei & Shen, Yedan & Razzaq, Asim, 2023. "How renewable energy investment, environmental regulations, and financial development derive renewable energy transition: Evidence from G7 countries," Renewable Energy, Elsevier, vol. 206(C), pages 1188-1197.
    30. Li, Menghan & Zaidan, Amal Mousa & Ageli, Mohammed Moosa & Wahab, Salman & Khan, Zeeshan, 2023. "Natural resources, environmental policies and renewable energy resources for production-based emissions: OECD economies evidence," Resources Policy, Elsevier, vol. 86(PA).
    31. Lashitew, Addisu A. & Werker, Eric, 2020. "Do natural resources help or hinder development? Resource abundance, dependence, and the role of institutions," Resource and Energy Economics, Elsevier, vol. 61(C).
    32. Muhammad Imran & Sajid Ali & Yousef Shahwan & Jijian Zhang & Issa Ahmad Al-Swiety, 2022. "Analyzing the Effects of Renewable and Nonrenewable Energy Usage and Technological Innovation on Environmental Sustainability: Evidence from QUAD Economies," Sustainability, MDPI, vol. 14(23), pages 1-16, November.
    33. Zhang, Liguang & Li, Zhuohao & Liao, Yunxiang & Wang, Yunchen & Hu, Ning, 2023. "Foreign investment and information quality – A quasi-experiment from China," International Review of Financial Analysis, Elsevier, vol. 90(C).
    34. Gao, Huasheng & Liu, Zhengkai & Yang, Chloe Chunliu, 2023. "Individual investors’ trading behavior and gender difference in tolerance of sex crimes: Evidence from a natural experiment," Journal of Empirical Finance, Elsevier, vol. 73(C), pages 349-368.
    35. Ross Levine, 2001. "International Financial Liberalization and Economic Growth," Review of International Economics, Wiley Blackwell, vol. 9(4), pages 688-702, November.
    36. Paola Bongini & Małgorzata Iwanicz-Drozdowska & Paweł Smaga & Bartosz Witkowski, 2017. "Financial Development and Economic Growth: The Role of Foreign-Owned Banks in CESEE Countries," Sustainability, MDPI, vol. 9(3), pages 1-25, March.
    37. Sachs,Jeffrey & Kroll,Christian & Lafortune,Guillame & Fuller,Grayson & Woelm,Finn, 2021. "Sustainable Development Report 2021," Cambridge Books, Cambridge University Press, number 9781009098915, Enero-Abr.
    38. Funda Hatice Sezgin & Yilmaz Bayar & Laura Herta & Marius Dan Gavriletea, 2021. "Do Environmental Stringency Policies and Human Development Reduce CO 2 Emissions? Evidence from G7 and BRICS Economies," IJERPH, MDPI, vol. 18(13), pages 1-13, June.
    39. Guo, Wen & Yang, Bo & Ji, Jiong & Liu, Xiaorui, 2023. "Green finance development drives renewable energy development: Mechanism analysis and empirical research," Renewable Energy, Elsevier, vol. 215(C).
    40. Kim, Bora & Lee, Seoki, 2022. "The impact of celebrity CEOs on restaurant firm performance: The moderating role of environmental dynamism," Journal of Business Research, Elsevier, vol. 139(C), pages 869-880.
    41. Meng, Bing & Xue, Kunkun & Han, Miaoyi, 2022. "Digitalization, natural resources rents, and financial market risk: Evidence from G7 countries," Resources Policy, Elsevier, vol. 79(C).
    42. Sachs,Jeffrey & Kroll,Christian & Lafortune,Guillame & Fuller,Grayson & Woelm,Finn, 2021. "Sustainable Development Report 2021," Cambridge Books, Cambridge University Press, number 9781009102896, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Xiukun Ge & Muhammad Imran & Kishwar Ali, 2025. "Natural resource‐driven prosperity: Unveiling the catalysts of sustainable economic development in the United States," Natural Resources Forum, Blackwell Publishing, vol. 49(2), pages 1823-1841, May.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Muhammad Imran & Md Shabbir Alam & Zhang Jijian & Ilhan Ozturk & Salman Wahab & Mesut Doğan, 2025. "From resource curse to green growth: Exploring the role of energy utilization and natural resource abundance in economic development," Natural Resources Forum, Blackwell Publishing, vol. 49(2), pages 2025-2047, May.
    2. Usman Mehmood, 2024. "Assessing the Impacts of Eco-innovations, Economic Growth, Urbanization on Ecological Footprints in G-11: Exploring the Sustainable Development Policy Options," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(4), pages 16849-16867, December.
    3. Huang, Chaoqun & Liu, Weibai & Iqbal, Wasim & Shah, Syed Ale Raza, 2024. "Does digital governance matter for environmental sustainability? The key challenges and opportunities under the prism of natural resource management," Resources Policy, Elsevier, vol. 91(C).
    4. Elvis Kwame Ofori & Seth Appiah‐Opoku, 2024. "Sustainable Development Goals in BRICS and G7 countries: Increasing accomplishments through policy synergies in four dimensions," Sustainable Development, John Wiley & Sons, Ltd., vol. 32(1), pages 287-306, February.
    5. Yaping Guo & Ibrahim Alnafrah & Xinmeng Hou & Reem A. Almenweer & Usman Mehmood, 2025. "How natural resources and technological advancements affect environmental quality: Evidence from load capacity factor in N‐11 nations," Natural Resources Forum, Blackwell Publishing, vol. 49(2), pages 1769-1794, May.
    6. Zhaohan Wang & Kishwar Ali & Sami Ullah, 2025. "Revisiting natural resources and financial development nexus in China under the lens of time‐frequency approach," Natural Resources Forum, Blackwell Publishing, vol. 49(1), pages 541-560, February.
    7. Destek, Mehmet Akif & Hossain, Mohammad Razib & Manga, Müge & Destek, Gamze, 2024. "Can digital government reduce the resource dependency? Evidence from method of moments quantile technique," Resources Policy, Elsevier, vol. 99(C).
    8. Xiukun Ge & Muhammad Imran & Kishwar Ali, 2025. "Natural resource‐driven prosperity: Unveiling the catalysts of sustainable economic development in the United States," Natural Resources Forum, Blackwell Publishing, vol. 49(2), pages 1823-1841, May.
    9. Javed, Asif & Shabir, Maria & Rao, Fabeha & Uddin, Muhammad Salah, 2025. "Effect of green technological innovation and financial development on green energy transition in N-11 countries: Evidence from the novel Method of Moments Quantile Regression," Renewable Energy, Elsevier, vol. 242(C).
    10. Sun, Lingyun & Hasi, Muqier, 2024. "Effects of mining sector FDI, environmental regulations, and economic complexity, on mineral resource dependency in selected OECD countries," Resources Policy, Elsevier, vol. 89(C).
    11. Meng Zhang & Yao Tian & Muhammad Kamran Khan, 2025. "Time series approach to examine the impact of economic uncertainty, economic growth and financial development on human health," Natural Resources Forum, Blackwell Publishing, vol. 49(2), pages 2067-2080, May.
    12. Javed, Hasnain & Du, Jianguo & Iqbal, Shuja & Nassani, Abdelmohsen A. & Basheer, Muhammad Farhan, 2024. "The impact of mineral resource abundance on environmental degradation in ten mineral- rich countries: Do the green innovation and financial technology matter?," Resources Policy, Elsevier, vol. 90(C).
    13. Li, Menghan & Zhang, Kaiyue & Alamri, Ahmad Mohammed & Ageli, Mohammed Moosa & Khan, Numan, 2023. "Resource curse hypothesis and sustainable development: Evaluating the role of renewable energy and R&D," Resources Policy, Elsevier, vol. 81(C).
    14. Ullah, Sana & Gozgor, Giray & Lu, Zhou, 2024. "How do conflicts affect energy security risk? Evidence from major energy-consuming economies," Economic Analysis and Policy, Elsevier, vol. 82(C), pages 175-187.
    15. Sampene, Agyemang Kwasi & Li, Cai & Wiredu, John, 2024. "An outlook at the switch to renewable energy in emerging economies: The beneficial effect of technological innovation and green finance," Energy Policy, Elsevier, vol. 187(C).
    16. Carmen García-Peña & Moneyba González-Medina & Jose Manuel Diaz-Sarachaga, 2021. "Assessment of the Governance Dimension in the Frame of the 2030 Agenda: Evidence from 100 Spanish Cities," Sustainability, MDPI, vol. 13(10), pages 1-21, May.
    17. Zheng, Chengting & Wu, Shufang & Teng, Yin-Pei & Wu, Shuzhao & Wang, Zhe, 2023. "Natural resources, tourism resources and economic growth: A new direction to natural resources perspective and investment," Resources Policy, Elsevier, vol. 86(PB).
    18. Zheng, Li & Yuan, Ling & Khan, Zeeshan & Badeeb, Ramez Abubakr & Zhang, Leilei, 2023. "How G-7 countries are paving the way for net-zero emissions through energy efficient ecosystem?," Energy Economics, Elsevier, vol. 117(C).
    19. Khan, Yasir & Hassan, Taimoor & Guiqin, Huang & Nabi, Ghulam, 2023. "Analyzing the impact of natural resources and rule of law on sustainable environment: A proposed policy framework for BRICS economies," Resources Policy, Elsevier, vol. 86(PA).
    20. Wang, Xiang & Yin, Jian & Yang, Yao & Muda, Iskandar & Abduvaxitovna, Shamansurova Zilola & AlWadi, Belal Mahmoud & Castillo-Picon, Jorge & Abdul-Samad, Zulkiflee, 2023. "Relationship between the resource curse, Forest management and sustainable development and the importance of R&D Projects," Resources Policy, Elsevier, vol. 85(PA).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:natres:v:49:y:2025:i:2:p:1081-1107. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://doi.org/10.1111/(ISSN)1477-8947 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.