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This study aims to examine the relationship between financial development (FD), financial risk, green finance and innovation related to carbon emissions in the G7 economies.

This quantitative study examines the roles that financial development [FD: Domestic credit to private sector by banks as percentage of gross domestic product (GDP)], economic growth (GDP: Constant US$ 2015), financial risk index (FRI), green finance (GFIN: Renewable energy public research development and demonstration (RD&D) budget as percentage of total RD&D budget), development of environment-related technologies (DERTI: percentage of all technologies) and human capital (HCI: index) have on the environmental quality of developed economies. Based on panel data, the study uses a novel approach method of moments quantile regression as a main method to tackle the issue of cross-sectional dependency, slope heterogeneity and nonnormality of the data.

The study confirms that increasing economic development increases emissions and negatively impacts the environment. However, efficient resource allocation, improved financial systems, and green innovation are likely to contribute to emission mitigation and the overall development of a sustainable viable economy. Furthermore, the study highlights the importance of risk management in financial systems for future emissions prevention.

The study uses a reliable estimation procedure, which extends the discussion on climate policy from a COP-27 perspective and offers practical implications for policymakers in developing more effective emission mitigation strategies.

The study offers policy suggestions for a sustainable economy, focusing on both COP-27 and the G7 countries. Recommendations include implementing carbon pricing, developing carbon capture and storage technologies, investing in renewables and energy efficiency and introducing financial instruments for emission mitigation. From a COP-27 standpoint, the G7 should prioritize transitioning to low-carbon economies and supporting developing nations in their sustainability efforts to address the pressing challenges of climate change and global warming.

In comparison to the literature, this study examines the importance of financial risk for G7 economies in promoting a sustainable environment. More specifically, in the context of FD and national income with carbon emissions, previous researchers have disregarded the importance of green innovation and human capital, so the current study fills the gap in the literature related to G7 economies by exploring the link between the identified variables related to carbon emissions.

This study conducts an analysis of the interplay between governance quality, environmental expenditure of the government, and pollution emissions (measured as CO2 emissions) within the BRIC economies.

Utilizing the FMOLS model and marginal effects, we investigate the influence of governance quality and environmental expenditure on environmental quality (CO2 emissions) over the period 1996–2020. We took data for Brazil, Russia, India and China. We excluded South Africa due to its due to its small economic size relative to other BRIC economies, sluggish industrial growth and deteriorating foreign trade which gives contrast outliers to our data.

Results indicate that government investments in environmental protection contribute to a reduction in CO2 emissions. However, the effectiveness of these expenditures is contingent upon the quality of governance. This underscores the significance of robust governance for realizing meaningful reductions in air pollution through environmental spending. Further, increase in GDP per capita and the industrial sector's share of GDP are associated with a significant rise in CO2 emissions across BRIC economies. Conversely, FDI and trade openness exhibit a negative impact on CO2 emissions, with this effect gaining greater resilience when accounting for governance factors.

Like any other studies, the present study also suffers from some limitations. First, besides air quality, environmental quality encompasses multiple dimensions and various characteristics such as water purity, noise pollution, open space access, visual effects of buildings etc. But the present study included only CO2 (air quality) as a proxy of environmental quality due to various problems of data and methods. Second, CO2 (carbon dioxide) emission, which is the dependent variable in our model, is actually influenced by various quantitative and qualitative (both natural and man-made) factors. We included only nine independent variables. However, we could not include many variables due to lack of consistent data. Third, this study included only four countries – Brazil, Russia, India and China (BRIC) and excluded South Africa which is a member of the BRICS block due to its economic size, sluggish industrial growth and deteriorating foreign trade which gives contrast outliers to our data set of the four BRIC countries. Therefore, the future research may be carried out by addressing those issues for better understanding of the environmental problems, governance and policies thereon.

(i) Establish environmental governance committees – The four BRIC countries including South Africa should form a committee comprising government, civil society, and private sector representatives for comprehensive oversight and collaboration in environmental governance. (ii) Invest in capacity building for environmental institutions – Allocate resources to enhance environmental institutions' capacity through training, data improvement, and enforcement strengthening. (iii) Implement green procurement policies – Encourage green procurement in government agencies to drive demand for eco-friendly products and services, promoting sustainable practices. (iv) Incentivize green technology development – Offer tax credits or subsidies to stimulate green technology adoption, including renewable energy and sustainable agriculture. (v) Promote sustainable urban development – Prioritize sustainable urban strategies like public transportation investment and green space promotion to mitigate urbanizations' environmental impacts. (vi) Enhance cross-border cooperation – Foster collaboration on transboundary environmental issues among four BRIC nations including South Africa, including joint research and policy responses. (vii) Promote green finance and investment – Mobilize green finance to support sustainable development projects through instruments like green investment funds and bonds.

This study distinguishes itself by offering a unique analysis of both individual and combined effects of governance and environmental expenditure on environmental quality. Additionally, it encompasses various dimensions of governance, an aspect rarely explored in the BRIC countries.