Role of financial development and inclusivity in moderating the environmental effects of human development

The era of prioritizing economic growth, regardless of its overall impact, has ended. An integrative approach to global development that is increasingly human-centered and environmentally friendly, as well as promotes social resilience must be considered. This study assesses the beneficial role of a mature and inclusive financial architecture in environmental quality, emphasizing the impact of human development. Findings reveal that financial development mitigates the overall negative impact of human development on environmental degradation, as measured by carbon emissions and ecological footprint, in developed countries. This study raises awareness regarding the impact of human development on environmental degradation in 25 European countries between 1996 and 2019. It employs the two-step Generalized Method of Moments (GMM) as the main estimator to reveal the empirical effects, with the Driscoll–Kraay estimator serving as a robustness test. Furthermore, we explore the significance of economic freedom, renewable energy, and green innovation in curbing environmental impact.