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The study aims to investigate the impact of financial inclusion (FI) on environmental quality and the mediating role of industrialization (IZ). In addition, these relationships among the counties with different levels of income and carbon emissions were also analyzed.

This paper used the International Monetary Fund database for indicators of FI. The environmental indicators were obtained from the World Bank database for a panel of worldwide countries from 2004 to 2019. Separate indices of environmental sustainability (ES) and environmental degradation (ED) were created by using principal component analysis . The generalized method of moments regression was applied to examine the relationship between variables.

The study found full mediation of IZ between FI and ES, whereas partial mediation between FI and environmental degradation. The results were found robust against alternative measures of carbon emissions. Furthermore, the study also bifurcated the sample according to the level of income and carbon emission. It was found that FI plays a positive role in the betterment of environmental quality for high-income countries, while a negative role in upper-middle-income, lower-middle-income and low-income countries. Besides, FI has a negative role in the ES of the countries having higher or lower carbon emission levels.

Empirically this study contributes by creating two different novel measures of ES and environmental degradation, in contrast to other studies that solely relied on carbon emission. Contrary to previous studies, this study suggests that FI is not solely responsible for environmental damages, and IZ is the key channel by which FI shifts its impact on ES. Moreover, for environmental degradation, there are some other channels involved that need to be investigated further. This study has also noted that the relationship between FI and ES is context-dependent. Theoretically, this paper contributes to the literature by using ecological modernization theory in the nexus of FI, IZ and environmental quality.

Asia is the largest and most densely inhabited region in the world. Despite exhibiting an extremely expeditious economic growth, the majority of the world population categorized as poor resides in Asia, with more than a billion people financially excluded. This study aims to assess how social sustainability (SS) may increase financial inclusion (FI) and maintain financial stability (FS) in Asia.

Established on the stakeholder theory, the study analyzed the association among SS, FI and FS in Asia, employing a generalized method of moment’s estimation. The mediation of FI was also investigated in the relationship between SS and FS. Moreover, this study has analyzed the alternative proxies for the variables of interest to ensure dynamic results.

The findings point toward a positive association among SS, FI and FS. Furthermore, FI is observed to be undertaking a partial mediating role between SS and FS.

This study emphasizes that both SS and FI have individual parts in the amelioration of FS in Asia, whereas previous studies implied that FI is a mere tool for stimulating SS. Hence, Asian policymakers must keep these outcomes in mind due to their simultaneous contribution to FS.

The relationship between SS, FI and FS has received little attention in the literature. No previous study has deduced that increasing SS may instigate an increase in FI and FS. Additionally, quite contrary to previous studies that relied on narrow indicators, this study develops a broad measurement of SS by considering a wide range of crucial indicators for a sustainable society.