Investigating the role of financial development and technology innovation in climate change: evidence from emerging seven countries

Amid raising ecological concerns, the role of sustainable financial system and emerging technologies have gained significant attention. And a relatively less attention has been given to these factors in emerging economies. Therefore, this study intends to investigate the effects of financial development and technology innovation on climate change (CO2 emissions) in Emerging Seven countries over the period 1980–2020. In doing so, we have adopted a dynamic panel data model, that is, generalized method of moments, where climate change is given as an endogenous function of financial development and technology innovation by controlling the effects of economic growth, trade openness, population, industrialization, and urbanization. The overall results exhibit that the direct effect of financial development on climate change is adverse; however, the indirect effect through moderation of technology innovation is significantly positive. These outcomes imply that technology innovation is imperative to neutralize the negative consequences of financial development on climate change. These findings advocate financial reforms that effectively encourage and incentivize firms to embrace efficient and environmental friendly technologies in the financial sector.