Asymmetric effects of venture capital on environmental sustainability in OECD nations

This study examines the impact of venture capital on environmental sustainability in OECD countries, focusing on the mediating roles of green innovation and environmental policy stringency. Using AMG, CCEMG, and CS-ARDL estimators on panel data spanning 2005–2022, the analysis tests the EKC, LCC, and NRKC hypotheses. Findings reveal that venture capital significantly enhances environmental sustainability by reducing CO₂ emissions and improving ecological resilience, primarily through its influence on green innovation. The study’s integrated analysis reveals that, in OECD countries, a 1 % increase in venture capital investment reduces carbon emissions by up to 0.31 % and that similar increases in green innovation cut emissions by as much as 0.30 %. Conversely, a 1 % rise in natural resource rents can elevate emissions by up to 0.26 %. These results underscore the transformative, quantifiable role of financial and technological innovation in advancing environmental sustainability, while highlighting persistent challenges linked to resource dependency. Environmental policy stringency strengthens this relationship, indicating that institutional frameworks enhance the effectiveness of financial mechanisms. Results confirm non-linear environmental relationships and highlight the positive role of financial development, while trade openness and resource rents present mixed effects. This study is novel in integrating venture capital, green innovation, and environmental policies within a comprehensive macro-panel framework, offering new empirical insights into their dynamic interactions. Policies should incentivise green innovation, enforce environmental regulations, and channel venture capital into sustainable technologies to promote long-term ecological balance.