Financial development and sustainable development: A review of literature

Abstract

In the contemporary world, the sustainability of the economic system and its related issues are of major concern for both policy makers and practitioners. The financial sector's role in this context has gained significant attention over the past decades. Although theoretical studies are on the rise, few scholars consolidate both theory and practice. This study addresses this gap through comprehensive bibliometric analysis, mapping the research landscape in the finance‐sustainability field, and encompassing both optimistic and skeptical perspectives. It reviews and synthesizes key theoretical and empirical literature focusing on most recent studies. Specifically, it emphasizes broader aspects of financial development—depth, access, efficiency, and stability—in critically analyzing the economic, environmental, and social pillars of sustainable development, which are distinct yet highly interconnected. It further provides a detailed analysis of sustainable development theories, highlighting their shortcomings and future prospects. Particularly, this study identifies different dimensions, significant factors, and important indicators of sustainability which are vital for achieving and understanding long‐term sustainable development. Some practical implications are also discussed.