The Diverse Nature of Financial Institutions Development in Environmental Degradation: Evidence from Developed Economies

Purpose
This study empirically examines the impact of financial institutions (mutual funds, pension funds, banks and insurance firms) on the ecological footprint of six developed economies.

Design/methodology/approach
Using data from 2001 to 2020, we employed robust econometric techniques, including CS-ARDL, FMOLS, and the Dumitrescu & Hurlin (2012) panel causality test, to estimate the environmental impact of the development of both bank and non-bank financial institutions.

Findings
The findings report that banking development, mutual funds and pension funds reduce the ecological footprint. Whilst the insurance market's development enhances the ecological footprint, suggesting heterogeneous and diverse impacts of financial institutions on environmental quality. On the disintegration of insurance funds, we found that both non-life and life insurance market development increases the ecological footprint (depicted in Fig. 1). The findings suggest
comprehensive integration of ecological footprint quality in the investment/lending practices of financial institutions to mitigate environmental degradation in developed economies.

Originality/value
This study is the first of its kind to explore the impact of both financial (banks) and non-financial institutions' development on environmental degradation.