In a recent study published in Sustainable Development, Near East University researchers have explored how digitalization, green finance, and institutional quality interact to shape environmental sustainability in developing economies, highlighting the critical role of governance in ensuring that financial resources translate into meaningful environmental progress.

The study, titled “The Interplay of Digitalization, Green Finance, and Institutional Quality in Overcoming Corruption’s Impediments to Environmental Sustainability,” examines 15 West African economies between 2000 and 2022, investigating how corruption can undermine the effectiveness of green financing and financial development in supporting the transition toward a sustainable future.

The research was conducted by Ummukhulthum Adamu Ibrahim, Abraham Deka, and Huseyin Ozdeser, all affiliated with the Department of Economics at Near East University. Using advanced econometric techniques, including the Driscoll–Kraay estimation method, alongside Panel-Corrected Standard Errors (PCSE) and Feasible Generalized Least Squares (FGLS) for robustness testing, the researchers analyzed the relationships between digitalization, renewable energy, institutional quality, financial development, and environmental sustainability.

Their findings reveal that digitalization and renewable energy consumption contribute positively to environmental sustainability. However, the study identifies a significant challenge: financial development and green financing do not necessarily produce the expected environmental benefits in economies affected by corruption and weak governance. Instead, financial resources intended for sustainable development may be misallocated or diverted away from environmentally beneficial projects.

Importantly, the research highlights the complex role of institutional quality. While the primary estimation suggests that stronger institutions support environmental sustainability, alternative estimation methods reveal contrasting results, underscoring the challenges associated with governance effectiveness in developing economies.

The study emphasizes that increasing green financial flows alone is insufficient to achieve environmental sustainability without transparent institutions, effective regulatory oversight, and accountability mechanisms. The authors advocate stronger anti-corruption measures, institutional capacity building, improved environmental governance, and policy reforms to ensure that green investments deliver their intended benefits.

By integrating environmental economics, digital transformation, and institutional governance, this research contributes valuable evidence to global discussions on sustainable development, particularly in emerging economies. It also supports the objectives of the United Nations Sustainable Development Goals, particularly SDG 7 (Affordable and Clean Energy), SDG 13 (Climate Action), SDG 16 (Peace, Justice and Strong Institutions), and SDG 17 (Partnerships for the Goals).

For collaboration and inquiries, please contact Prof. Dr. Hüseyin Özdeşer, Head of the Department of Economics at Near East University, at [email protected].

About the researcher

Hüseyin Özdeşer is a Professor of Economics at the Faculty of Economics and Administrative Sciences, Near East University, where he has served as Head of the Department of Economics since 2001. He received his Ph.D. in Economic Policy from Marmara University in 2000 and has been a faculty member at Near East University since 1993. His academic interests include economic policy, European economic integration, monetary economics, renewable energy, sustainable development, environmental economics and international economics. He also serves as Coordinator of the European Union Relations Department. In 2024, he was awarded the Dr. Suat Günsel Honorary Gold Medal in recognition of his sustained academic contributions.

Abraham Deka is an Assistant Professor in the Department of Economics, Faculty of Economics and Administrative Sciences, Near East University, where he also obtained his Ph.D. in Economics. He serves in editorial roles for several international academic journals, including Elsevier’s Next journals, SN Business & Economics, Risks, Future Business and Humanities and Social Sciences Communications. With approximately 55 international publications and an H-index of 21, his research focuses on economic development, energy economics, environmental economics, and sustainable development.

Ummukhulthum Adamu Ibrahim is a master’s student in the Department of Economics at Near East University. Her research interests, as reflected in the featured publication, include environmental sustainability, green finance, digitalization, institutional quality, and the economic challenges facing developing countries.

Disciplines: Economics, Economic Policy, Environmental Economics, Energy Economics, Green Finance, Digitalization, Institutional Governance, Sustainable Development.

For collaboration and inquiries, please contact Prof. Dr. Hüseyin Özdeşer, Head of the Department of Economics at Near East University, at [email protected].

Abstract

Green finance, digitalization, and institutional quality are fundamental in fostering a green transition for environmental sustainability. However, in the developing nations, corruption impedes the role of green finance and financial development from enhancing environmental sustainability in various ways. Corruption diverts and misappropriates green funds, weakens environmental governance and policy, distorts financial development for green growth, and erodes public trust and institutional capacity. This research examines the role of digitalization and institutional quality in advancing environmental sustainability, as well as addressing how high corruption impedes green finance from advancing a green transition. This research employs longitudinal annual data of the 15 West African economies from 2000 to 2022, which is analyzed with the Driscoll–Kraay method. The robustness of the findings is checked with the “Panel Correlated Standards Error” and “Feasible Generalized Least Square” methods. The research findings support that digitalization, institutional quality, and renewable energy support environmental sustainability. However, corruption impedes green finance and financial development on environmental sustainability in the developing nations. Therefore, this research calls for the developing nations to address the corrosive grip through anti-corruption measures, capacity building, policy reforms, and international cooperation.

Keywords: digitalization, ecological sustainability, financial development, green energy, green technology