Green finance, innovation, and environment: Testing the EKC in ASEAN-4 with MMQR approach

Rising carbon emissions and environmental degradation in ASEAN-4 economies underscore the urgent need for sustainable financial mechanisms and innovative technologies to address climate challenges. Despite growing interest in green initiatives, limited research exists on their distributional impacts and causal links with environmental outcomes in this regional context. This study examines the nexus between green finance (GFIN), green innovation (GTI), and environmental sustainability within the Environmental Kuznets Curve (EKC) framework across Indonesia, Malaysia, the Philippines, and Thailand from 2000 to 2020. Employing advanced panel econometric techniques, Method of Moments Quantile Regression (MMQR), Bootstrap Quantile Regression (BSQR), and Dumitrescu-Hurlin Granger causality tests, the analysis reveals that both GFIN and GTI significantly reduce CO₂ emissions, with stronger effects at lower quantiles, indicating greater efficacy at early stages of environmental degradation. The EKC hypothesis is validated, as economic growth initially raises emissions but reduces them at higher income levels. Renewable energy (REN) consistently mitigates emissions, while non-renewable energy (NRE) worsens them across all quantiles, reinforcing the need for energy transition. Causality tests reveal a bidirectional relationship between CO₂ and NRE, and unidirectional causality from CO₂ to REN and GTI. These findings underscore critical policy imperatives: scaling up green finance, accelerating clean innovation, phasing out fossil fuel subsidies, and strengthening regional cooperation to decouple growth from emissions and advance Sustainable Development Goals (SDGs).