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Bridging Sustainability and Inclusion: Financial Access in the Environmental, Social, and Governance Landscape

Author

Listed:
  • Carlo Drago

    (UNICUSANO - University Niccolò Cusano = Università Niccoló Cusano)

  • Alberto Costantiello

    (LUM - Università LUM Giuseppe Degennaro = University Giuseppe Degennaro)

  • Massimo Arnone

    (Unict - Università degli studi di Catania = University of Catania)

  • Angelo Leogrande

    (LUM - Università LUM Giuseppe Degennaro = University Giuseppe Degennaro)

Abstract

This paper explores the correlation between financial inclusion and the Environment, Social, and Governance (ESG) aspects of sustainable development for a big panel of 103 developing nations over 12 years. Financial inclusion as a measure is taken through the Account Age variable capturing adults having access to formal financial institutions as a percentage. The analysis revolves around the three main ESG pillars each through panel data regressions complemented by instrumental variable (IV) approaches in addressing endogeneity concerns. In the Environment (E) dimension, we find conventional agricultural forms (e.g., extensive agricultural land areas and agriculture value added) as having a negative effect on financial inclusion, but the environmental modernization proxies—renewable energy utilization, food production, climate resilience, and areas under protection—exhibit positive and significant correlations. In the Social (S) dimension, development indicator variables like spending on education, internet penetration, life years at birth, sanitation, and gender equity emerge as strong predictors of higher financial inclusion, and labor market participation is found to have a negative effect, possibly due to the dynamics of employment in the informal sector. The Governance (G) analysis shows positive correlation with controlling corruption and innovation production (applications for patents) as arguments for increased financial access improving institutional transparency and economic ingenuity and a negative correlation with regulatory quality as a concern for capacity gaps in rapidly digitizing economies. Through the means of ESG-matched environmental instruments, this paper presents a unique cross-dimensional approach to sustainable finance and shows through counterfactual analysis under both average and counterfactual distributions that policies supporting financial inclusion can be a path to multiple benefits on the environmental sustainability, social equity, and governance effectiveness axes—key requirements for the success of the Sustainable Development Goals (SDGs) in the Global South.

Suggested Citation

  • Carlo Drago & Alberto Costantiello & Massimo Arnone & Angelo Leogrande, 2025. "Bridging Sustainability and Inclusion: Financial Access in the Environmental, Social, and Governance Landscape," Working Papers hal-05082520, HAL.
    • Handle: RePEc:hal:wpaper:hal-05082520
    Note: View the original document on HAL open archive server: https://hal.science/hal-05082520v1
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    More about this item

    Keywords

    Financial Inclusion; ESG Framework; Developing Countries; Instrumental Variables; Sustainable Development.;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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