The nexus between environmental degradation, green finance, and sustainable development has been analyzed in a number of studies. Despite attempts by different studies to fill the gap in the existing literature, they have all failed to do so. This study further extends the existing literature by applying robust techniques such as the system-GMM method and applying various proxies to measure green finance, which other studies have failed to examine. For this purpose, we employ panel data for the period of 1985–2021. Our findings support our hypothesis: while green funding tends to have a positive effect on sustainable development, environmental degradation has exactly the opposite effect. These findings are supported by a wide range of statistical methods, including the system-GMM technique. Our work underlines the major contribution bound to be made by green resources toward legislative frameworks in an attempt to aid the effort of reducing the negative impact of environmental degradation and building a sustainable development path.