Work

Can Digital Finance Drive Green Growth and Sustainable Development? Evidence From 118 Countries Across Development Status and Crisis Contexts

Year: 2026

Type: article

Abstract: ABSTRACT This study investigates whether and under what conditions digital finance advances green growth (GG) and broader sustainable development (SD) objectives in a financially volatile, climate‐constrained, and developmentally unequal world. Using annual data for 118 developed and developing countries from 2004 to 2022, we construct four Principal Component Analysis (PCA)‐based indices of fintech adoption (FTA), financial development (FD), digital financial literacy (DFL), and GG. The framework distinguishes GG as an operational pathway within wider equity, capability, resilience, and welfare objectives under the SDGs. A multi‐theoretical framework integrating Disruptive Innovation Theory, Financial Development Theory, Capability Theory, and Ecological Modernization Theory informs the analysis. System‐GMM estimates the dynamic relationships, while 2SLS provides an endogeneity‐based robustness check. Results show that FTA and DFL are positively associated with GG, whereas FD has a generally negative relationship. FTA follows a U‐shaped pattern in the full sample and developed economies: early adoption is associated with greater environmental pressures, but its contribution becomes positive beyond a digital‐maturity threshold and is concentrated in stable periods. In developing economies, FTA displays a positive convex relationship with GG. DFL has its strongest association in developing countries and during financial crises, underscoring its role in inclusive and crisis‐adaptive SD. The study provides global evidence that the sustainability effects of digital finance depend on technological maturity, user capability, development conditions, and crisis exposure. It also shows that conventional financial deepening may remain misaligned with sustainability objectives, offering policy guidance for SDG‐aligned digital finance, low‐carbon transitions, and inclusive economic transformation.

Source: Sustainable Development

DOI: 10.1002/sd.71745

Authors: Sehar Saleem, Zakaria Boulanouar, Shumaila Zeb, Sami Ullah

Institutions: Shaheed Zulfiqar Ali Bhutto Institute of Science and Technology, Al Ain University, United Arab Emirates University

Language: English

Topic: FinTech, Crowdfunding, Digital Finance

Subfield: Management Information Systems

Field: Business, Management and Accounting

Domain: Social Sciences

SDGs: Climate action, Partnerships for the goals, Industry, innovation and infrastructure, Decent work and economic growth

Open Access status: hybrid

Estimated APC paid: $4,250