Political risk and environmental quality in Brazil: Role of green finance and green innovation

Abstract

The quest for ecological sustainability while reducing the impacts of environmental deterioration has become a worldwide endeavour. Furthermore, it is unclear how developing economies such as Brazil can considerably improve environmental quality (EQ). This paper contributes to the ongoing literature by evaluating the effect of green finance, economic growth, political risk, social globalization and green innovation on environmental quality in Brazil. The study used data spanning between 2000Q1 and 2018Q4. Unlike other investigations, the current study used load capacity factor as a proxy for environmental quality, which considers both demand and supply sides of environmental issues. The current study applied the novel dynamic ARDL to capture the short and long‐run nexus. The bootstrap causality test was also applied to capture causal connection instabilities over time. The results of this study are as follows: (1) a significant and positive association was found between political risk, green finance, green innovation and social globalization environmental quality; (2) a significant and negative interplay was detected between economic growth and environmental quality; (3) The time‐varying causality shows a feedback causality at various periods between political risk, green finance, green innovation, economic growth, social globalization and environmental quality. This study also serves as a reference point for governments and policymakers in terms of investing in eco‐friendly technologies in order to improve environmental quality.

Modelling the green logistics and financial innovation on carbon neutrality goal, a fresh insight for BRICS‐T

“…This initiative aims to regulate and minimize the direct and indirect emissions of greenhouse gases (GHGs), including carbon dioxide (CO 2 ), methane (CH 4 ) and nitrous oxide (N 2 O), which contribute significantly to the climate crisis and pose a serious threat to human existence (Kirikkaleli, Sofuoğlu, & Ojekemi, 2023a, Kirikkaleli, Sowah, et al, 2023b). Organizations from various industries are joining forces to achieve this objective (Jianguo et al, 2022; Kirikkaleli & Adebayo, 2022). In 2021, the average worldwide temperature was around 1.1°C higher than the pre‐industrial level (from 1850–1900).…”

Decoupling the role of renewable energy, green finance and political stability in achieving the sustainable development goal 13: Empirical insight from emerging economies

“…This is mainly because green finance aids the effective allocation of financial resources, which augments the accessibility to clean energy sources at a lower cost and subsequently helps to replenish environmental quality by lessening emissions (Li, Dong, et al, 2022). A study by Kirikkaleli and Adebayo (2022) investigated the impact of political risk, green financing, and green innovation on the environmental quality of Brazil from 2000 to 2018 using the dynamic ARDL model. They concluded that green financing, green innovation, and political risk induce environmental quality; thus, they suggested implementing effective policy measures to encourage investments in eco‐friendly technologies.…”

“…Moreover, the recent COP27 meeting reveals the need for annual investments of USD 4–6 trillion in the renewable energy sector, incorporating investments in the advancement of technologies and infrastructure facilities, to attain the environmental goals by 2050 (UNCC, 2022). Therefore, ‘international financial flows to support renewable energy production’, also known as green finance , encourage the advancement of renewable energy infrastructure and technological know‐how and promote R&D activities in the renewable energy sector (Kirikkaleli & Adebayo, 2022). Furthermore, green finance aims to abate emissions by channelling the financial aid into environmental‐friendly projects that foster environmental quality to attain sustainable growth (Hunjra et al, 2023; Shariff et al, 2022).…”

Environmental, social, governance risk versus cooperation models between financial institutions and businesses. Sectoral approach and ESG risk analysis

“…The literature on the subject highlights the influence of the political factor on green finance, green innovation and social globalization environmental quality (Kirikkaleli and Adebayo, 2022). This is an important element that manifests itself in the "G" risk factor of ESG and may create political risk.…”