Carbon neutrality and sustainable development goals have become globally imperative, as evidenced by the Paris Agreement, and the Nationally Determined Contributions mechanism. At the recently ended COP28 climate summit, the majority of the participating countries encountered these challenges through financial commitments to attain their objectives of carbon neutrality for sustainable development. Green finance and environmental decentralization play key roles in realizing these targets. The core focus of this study is to demystify the impacts of green finance and environmental decentralization on sustainable development by employing a panel dataset comprising 44 OECD countries, spanning 1995–2022. Ecological footprint serves as an indicator of sustainable development. Financial investment directed towards climate change mitigation and climate change adaptation technologies with alternative output-input green finance indicators are used as measures for green finance. A new index was devised that incorporates multiple indicators of environmental decentralization to gauge its influence on sustainable development. Using OLS, Oster coefficient stability, Lewbel 2SLS, and Kiviet instrumental variable techniques, our findings demonstrate that green finance significantly enhances sustainable development across countries. The empirical findings reveal that green finance and environmental decentralization exhibit a positive, statistically significant influence on sustainable development in OECD countries, while also playing a mitigating role in the reduction of environmental degradation. Considering these findings, it is imperative that OECD countries formulate and implement policies that foster green financing and empower local governments. This formulation and authorization are crucial for reducing pollution through the stimulation of innovation in climate change mitigation and adaptation technologies. In doing so, these policies will substantially reinforce the achievement of the United Nations’ Sustainable Development Goals 9 and 12.

This study investigates the impact of globalization, energy consumption, economic growth, urbanization, and trade openness on environmental degradation in case of Pakistan. The dynamic autoregressive distributed lag (DARDL) technique was applied to measure the short- and long-term estimates, which are robust and have higher predictive power compared to the conventional ARDL technique with a dataset that spans from 1980 to 2023 for Pakistan. The empirical findings confirm a significant long-run cointegrating relationship among the variables under investigation. Specifically, globalization and trade openness are found to exert a significant negative impact on CO₂ emissions, suggesting their potential role in fostering environmental amelioration. Conversely, energy consumption and economic growth demonstrate a significant positive impact on CO₂ emissions, indicating their contribution to increased environmental degradation. Notably, urbanization does not show a significant relationship with CO₂ emissions, a finding attributed to Pakistan’s inefficient and environmentally unfriendly urban infrastructure, despite a substantial 2.93 percent annual rate of urbanization. Furthermore, the widely posited Environmental Kuznets Curve (EKC) hypothesis is not supported by the data; instead, economic growth appears to be associated with an exponential increase in CO₂ emissions. The findings offer crucial policy insights for sustainable development initiatives for Pakistan and generally for developing nations.