Balancing finance and sustainability: The impact of financial access on carbon emissions through innovation and entrepreneurship in a global study

Abstract

This study examines the interplay between financial access, innovation, entrepreneurship, and carbon emissions using a dataset of 149 countries over 24 years (2000–2023). Employing two-stage least squares (2SLS) techniques to address endogeneity, the findings reveal that financial access significantly boosts innovation and entrepreneurship, which are key drivers of economic growth. However, financial access may also increase carbon emissions if not aligned with sustainable practices. Innovation reduces emissions by fostering environmentally friendly technologies, while entrepreneurship initially contributes to emissions but can mitigate this effect when supported by sustainable financial practices. The study highlights the importance of financial policies that promote green innovation and sustainable entrepreneurship, offering actionable insights for policymakers to achieve economic growth while addressing global carbon emissions. • Increased financial access significantly enhances innovation. • Entrepreneurship initially increases carbon emissions. • Sustainable entrepreneurship significantly reduces carbon emissions. • Financial access can lead to higher carbon emissions through increased energy consumption. • Financial access moderates the relationship between innovation and carbon emissions.