International Journal of Sustainable Economy (16 papers in press)

Regular Issues

• Modelling Connectedness and Diversification Among Socially Responsible Investments in Asia
  by Neha Seth, Deepti Singh 
  Abstract: The study investigates the cointegration and volatility interdependence among sustainable indices of emerging Asian countries by employing Johansen’s cointegration, Granger causality test and dynamic conditional correlation (DCC) GARCH model. The analysis reveals no long-run relationship among these indices, and all the indices are significantly affected by their lagged values. The results also present that past shocks and volatility have a significant role in the present volatility of the sustainable indices. However, past volatility has more impact, which lasts with stronger persistence. The significant DCC terms infer that volatility spillover exists between sustainable Asian markets. The study also calculated optimal portfolio weights to provide better diversification opportunities to minimise the risks without hampering the potential returns. The study suggests that long-term investors may earn profit by adding these non-integrated sustainable indices to their portfolios, but they must diversify and hedge to safeguard from losses during economic and financial turmoil.
  Keywords: volatility spillover; Johansen’s cointegration; DCC-GARCH; sustainable stock index; optimal portfolio weights; emerging Asia.
  DOI: 10.1504/IJSE.2025.10060802
   
  
• ESG Disclosure and Financial Success: A Comparative Dive into India's Manufacturing and Service Sectors  
  by Santi Gopal Maji, Prachi Lohia 
  Abstract: This paper examines the financial impact of environmental, social, and governance (ESG) disclosure in Indian manufacturing and service companies. The study employs a panel approach by utilising secondary data for a sample of 209 Indian-listed firms for 2020 and 2021. Empirical analysis conducted using suitable panel regression models reveals a significant positive financial impact of ESG disclosure in both sectors. However, manufacturing firms showcase improved market value while the service-sector firms experience higher accounting profits. This study highlights the role of a firm’s sector in explaining the consequent financial impact of ESG disclosure. It also emphasises the need for higher but material ESG disclosure and heightened investor awareness. Notably, this study represents the first comparative analysis of ESG’s effect on the financial performance of Indian manufacturing and service firms by considering indigenous ESG ratings from the Credit Rating Information Services of India Limited (CRISIL).
  Keywords: ESG; financial performance; manufacturing firms; service firms; CRISIL; India.
  DOI: 10.1504/IJSE.2025.10061702
   
  
• Nexus between agricultural production and environmental degradation based on the theory of Environmental Kuznets Curve: a dynamic panel data analysis  
  by Swati Sinha Babu  
  Abstract: Expansion and proliferation of agricultural sector plays a vital role in achieving the sustainable development goals related to ending poverty and hunger. However, its impact on the environment is not free from contention. The aim of present paper is to explore the association between agricultural production and methane emissions (as measure of environmental degradation), across 87 countries classified into higher, middle and lower income groups, covering the period 1990-2020. We have employed dynamic system generalisation method of moment (GMM) to investigate the environmental Kuznets curve hypothesis and study the long-run causal effects among considered variables. Results indicated presence of N-shaped relation between agricultural production and methane emissions for all groups of countries. Findings also revealed that fertiliser consumption and livestock production had detrimental impact on environment. Lastly, policy recommendations have been made related to agricultural production techniques and livestock management strategies that might help development of sustainable agriculture.
  Keywords: agricultural production; methane emission; rice cultivation; livestocks; environmental Kuznets curve; EKC; dynamic GMM; sustainability.
  DOI: 10.1504/IJSE.2025.10062034
   
  
• Effects on firm decisions considering the temporality of environmental policy  
  by Felipe Rivera, Katherin López, Jorge Zamorano 
  Abstract: This research analyses the effects of the temporality of environmental policy on firms’ location and abatement decisions. The policies are implemented by a regulator concerned about the welfare of society and environmental pollution. Therefore, it applies two instruments simultaneously: the tax on emissions, which seeks to internalise environmental costs, and the subsidy to clean technologies, which incentivises their adoption. In addition,the optimal levels of tax and subsidy that maximise social welfare are studied, considering the impact of the timing of the decision (ex-ante or ex-post). As for its resolution, a model of duopolistic firms competing in quantities in an emission-intensive sector is used. Among the main results, it is demonstrated that for both an ex-ante and ex-post implementation, social welfare is enhanced when environmental policies are in place. However, when the tax is applied ex-post and only one company chooses to remain in the local country, environmental damage increases.
  Keywords: environmental regulation; temporality of the decision; emission tax; subsidy R&D; location.
  DOI: 10.1504/IJSE.2025.10062267
   
  
• Exploring the impact of economic growth, export diversification, trade openness and renewable energy consumption on ecological footprint - evidence from India  
  by Saima Shadab  
  Abstract: This study investigates the nexus between economic growth, export diversification, trade openness, renewable energy consumption, and ecological footprint for India, using annual data from 1971 to 2014. The Lee-Strazicich unit root test is employed to take into account breaks in the data. Furthermore, the autoregressive distributed bound test (ARDL) has been used to examine the short and long-run relationship between the variables. The estimates reveal that economic growth and export diversification increase ecological footprint in the long run but not in the short run. Besides, the coefficient of renewable energy consumption indicates that an increase in it leads to an increase in ecological footprint. In contrast, an insignificant relationship between trade openness and ecological footprint was obtained. Based on the findings, the study recommends that an appropriate mix of policies related to energy efficiency, sustainable development and international trade is required to control environmental degradation in India.
  Keywords: economic growth; export diversification; ED; trade openness; TO; renewable energy consumption; ecological footprint; EF; environmental degradation; sustainability; India.
  DOI: 10.1504/IJSE.2025.10062962
   
  
• How do real and financial sectors in Africa respond to uncertainties from China, USA, and Europe  
  by Oliver E. Ogbonna, Jonathan E. Ogbuabor 
  Abstract: In spite of rising cross-border propagation of uncertainty shocks occasioned by the recent COVID-19 outbreak, existing studies barely addressed cross-border uncertainty effect on real and financial sectors, especially in Africa. Thus, this study has taken the initiative to investigate how the real and financial sectors in Africa are reacting to policy uncertainties from China, the USA and Europe. The study employed the generalised method of moment procedures for 41 African economies from 2010 to 2019. We find that rising uncertainty in China and Europe have significant adverse impacts on Africa’s real sector, while the impact of the USA uncertainty remains muted. Interestingly, we find that uncertainties from China and Europe have significant positive effects on Africa’s financial sector, suggesting that Africa is a safe-haven where investors transfer their investments away from risky environments witnessing high uncertainty. The study provides policy suggestions.
  Keywords: uncertainty; real sector; financial sector; two-step system GMM; Africa; China; the USA.
  DOI: 10.1504/IJSE.2025.10063600
   
  
• Economic freedom and financial development: do they reduce the shadow economy? A case study of Southeast Asian countries  
  by Buu Kiem Dang  
  Abstract: This study aims to assess the impact of economic freedom, financial development, and various macroeconomic factors on the scale of the shadow economy. The research sample includes 10 countries in the Southeast Asian region (excluding Timor-Leste) for the period from 1995 to 2018. The author employs various estimation methods on panel data, including the Fixed Effect Model, Driscoll and Kraay estimation, and two-step system GMM. The results indicate that economic freedom and financial development play significant roles in reducing the size of the shadow economy. This study suggests that (i) governments should consider improving economic freedom, particularly through substantial enhancements in trade freedom; (ii) governments need to implement more measures to facilitate access to credit for businesses and individuals in the private sector, and (iii) governments should maintain political stability in a stable and robust manner to contribute to reducing the size of the shadow economy.
  Keywords: economic freedom; trade freedom; financial development; shadow economy; Southeast Asian; political stability; credit for businesses; Driscoll and Kraay estimation; system GMM; fixed effect model; FEM.
  DOI: 10.1504/IJSE.2025.10065315
   
  
• The impact of expenses on the return of ESG and traditional mutual funds in India  
  by Bhakti Agarwal, Shailesh Rastogi 
  Abstract: This research endeavour aims to explore the relationship between the net asset value (NAV) and the total expenses ratio (TER) of both traditional and environmental, social, and governance mutual fund schemes in the Indian context. The study utilises a dataset spanning three years, encompassing nine traditional and nine ESG mutual fund schemes. The empirical analysis is conducted using panel data econometrics. The finding of this investigation reveals that the TER significantly and negatively impacts the NAV of both traditional and ESG funds. Additionally, this research highlights that traditional funds carry higher risk profiles in comparison to ESG funds, as evidenced by the greater variability in TER among traditional funds as opposed to ESG funds. This research has significant implications for fund managers and investors. The comparative analysis of traditional and ESG mutual fund schemes is an underexplored area of research, underscoring the uniqueness and novel contribution of the present study.
  Keywords: traditional fund; ESG fund; net asset values; NAVs; total expenses ratio; TER; mutual fund schemes; India.
  DOI: 10.1504/IJSE.2025.10066339
   
  
• An inverted U-shape relationship between economic growth and financial development: a study from FY20 countries  
  by Pratiwi Dwi Suhartanti, Bambang Iman Santoso, Mamduh M. Hanafi 
  Abstract: This study investigates the relationship between financial development and economic growth. Using the sample data of 85 countries, including 53 developed and 32 developing countries, we find results consistent with previous findings that financial development positively impacts economic growth up to a certain threshold. However, when we extend the analysis into developed-developing countries and four different income-level countries, we find that the thresholds tend to be lower for developing and low-income countries. Further investigations show that institutional quality affects the impact. The threshold is lower in countries with low institutional quality. We interpret that the countries with low institutional quality have less capability to contain the negative effect of the financial market, lowering the threshold. Thus, controlling the negative impact of the financial market is an important aspect of the relationship between financial development and economic growth.
  Keywords: economic growth; financial growth; threshold analysis; institutional quality; developing countries.
  DOI: 10.1504/IJSE.2025.10066658
   
  
• The nonlinear impact of ESG on firm default risk: evidence from Southeast Asia’s firms  
  by Anh Nguyen Thi Truc, Le Thanh Hoa  
  Abstract: This study investigates the impact of environmental, social, and governance (ESG) performance on firm default risk, utilising a sample of 147 Southeast Asian firms from 2007 to 2022. We estimate the research model using the generalised least squares (GLS) approach. Our findings reveal a nonlinear relationship between ESG performance and default risk. Specifically, before reaching the ESG score threshold of 57.12, an increase in ESG is associated with a rise in default risk; beyond this threshold, higher ESG scores correspond to a reduction in firm default risk. Additionally, our analysis indicates that after the 2015 Paris Agreement, the importance of ESG factors in reducing default risk has become more pronounced, especially for SMEs. The U-shaped relationship between ESG and firm default risk is attributed to the firm’s market value channel. Our results underscore the significance of effective ESG investment for enhancing financial stability, particularly in the context of evolving regulatory and market environments.
  Keywords: ESG; default risk; Southeast Asia; inverted U-shaped; SME; The 2015 Paris Agreement.
  DOI: 10.1504/IJSE.2025.10066818
   
  
• Macroeconomic determinants of unemployment in ECOWAS countries  
  by Peterson K. Ozili 
  Abstract: Unemployment is a major issue in ECOWAS countries and its determinants are not well-known. We investigate the macroeconomic determinants of unemployment in ECOWAS countries using data from 1993 to 2021. The data were analysed using the panel fixed effect and random effect regression methods. It was found that real GDP growth and central bank asset to GDP ratio are significant macroeconomic determinants of unemployment while inflation rate and domestic private credit have an insignificant effect on unemployment in ECOWAS countries. It was also found that higher domestic private credit significantly decreases unemployment during periods of economic expansion while periods of deflation decrease the rate of unemployment in ECOWAS countries. Positive economic growth is associated with low unemployment in ECOWAS countries.
  Keywords: unemployment; economic growth; ECOWAS; real GDP growth; central bank; inflation; West Africa; domestic credit to private sector.
  DOI: 10.1504/IJSE.2025.10067131
   
  
• Country-wide protests and financial stability  
  by Peterson K. Ozili 
  Abstract: This paper investigates the effect of country-wide protests on financial stability after controlling for inflation rate and the level of political stability. Country-wide protests may pressure a powerful government to listen and meet the demands of relatively less powerful groups, but country-wide protests can be destructive, especially when such protests lead to the destruction of the business assets of the clients of financial institutions, thereby making it difficult for them to meet their loan repayment and other obligations to financial institutions, and posing risk to the stability of the financial system. Financial stability and country-wide protests data were analysed for the UK. The empirical results show that bank non-performing loans are higher in country-wide protests years, implying that country-wide protests have a significant negative impact on financial stability through high non-performing loans in years where there are country-wide protests.
  Keywords: financial stability; UK; protest; demonstrations; non-performing loans; country-wide protests.
  DOI: 10.1504/IJSE.2025.10063273
   
  
• Petroleum subsidies, clean energy transition, and decarbonisation in oil-producing developing countries: what is the role of regulatory quality?  
  by Ibrahim Shittu, Abdul Rais Bin Abdul Latiff, Siti 'Aisyah Baharudin 
  Abstract: Energy transition and decarbonisation are critical gateways to cutting carbon emissions, improving energy security, and achieving the United Nations Sustainable Development Goals. Researchers have paid enormous attention to understanding key drivers of clean energy transition and decarbonisation. However, they have overlooked the role of fossil fuel subsidies and regulatory quality in developing countries where fuel subsidies are prominent and institutional quality is weak. This study employs a Prais-Winsten regression to examine the impact of petroleum subsidies and regulatory quality on clean energy transition and decarbonisation in 25 developing countries between 2010 and 2020. The result revealed that petroleum subsidies hinder the shift to clean energies and encourage high carbon intensity. However, when these subsidies are accompanied by a strong regulatory quality, they promoted energy transition and decarbonisation. The study recommends practical pathways to reform fuel subsidies, swap subsidy saving into clean energies, and strengthen regulatory quality.
  Keywords: clean energy; energy transition; carbon emission; decarbonisation; petroleum subsidies; regulatory quality; developing countries; Prais-Winsten regression; SDGs; renewable energy.
  DOI: 10.1504/IJSE.2025.10057898
   
  
• The relevance of renewable energy and green innovation in environmental sustainability: evidence from BRICS countries  
  by Lakshmana Padhan, Savita Bhat 
  Abstract: The study examines the significance of green innovation and renewable energy usage in reducing the carbon and ecological footprints in Brazil, Russia, India, China, and South Africa (BRICS) countries. It applies a series of econometric techniques and the Driscoll-Kraay standard errors regression approach to data collected between 1995 and 2018 based on the environmental Kuznets curve (EKC) hypothesis. Important macroeconomic control variables, such as industrialisation, urbanisation, financial development, trade openness, and natural resources, are also used to strengthen the model. Empirical results show that a 1% increase in green innovation reduces the carbon and ecological footprint by 0.229% and 0.226%, respectively. Further, increasing renewable energy consumption by 1% decreases the carbon and ecological footprints by 0.024% and 0.032%, respectively. Furthermore, the empirical findings support the EKC hypothesis. The study has important policy implications for governments and policymakers of emerging countries to invest more in green innovation and promote renewable energy.
  Keywords: green innovation; renewable energy; carbon footprint; ecological footprint; BRICS; Driscoll-Kraay standard errors; environmental Kuznets curve; EKC; environmental degradation; GDP; economic growth.
  DOI: 10.1504/IJSE.2025.10063275
   
  
• The moderating role of board gender diversity in the relationship between corporate social responsibility and financial performance: evidence from France  
  by Karima Lajnef, Sahar Turki, Siwar Ellouz 
  Abstract: This study examines the influence of corporate social responsibility (CSR) and governance mechanisms on financial performance (FP) and investigates how board gender diversity (BGD) moderates the relationship between FP and CSR. The study analyses data from French companies listed on the SBF 120 index between 2008 and 2020. The findings suggest that CSR performance and BGD have a positive impact on FP. Additionally, the study reveals a moderation of BGD in the relationship between CSR and FP. The research adds to our theoretical and empirical understanding of how BGD relates to CSR and FP. The results highlight the importance of considering the potential impact of CSR policy, governance mechanisms, and BGD on FP. Therefore, stakeholders should be more aware of these factors to promote better financial outcomes.
  Keywords: corporate social responsibility; CSR; financial performance; FP; board gender diversity; BGD; governance mechanisms.
  DOI: 10.1504/IJSE.2025.10060464
   
  
• Exploring the linkage of international trade and environmental pollution in Asia  
  by Hoang Xuan Binh, Huong-Giang Pham, Nguyen Ha My, Lai Thi Huyen Trang, Nguyen Minh Tien 
  Abstract: This paper utilises data from Asian countries from 2000-2020 (with consideration of the COVID-19 period) to explore the linkage between international trade and environmental pollution in this region. After controlling for heteroscedasticity and autocorrelation, results of a fixed-effect regression show that the export turnover, import turnover, GDP per capita, electricity consumption, population growth rate, and net receipt ratio of FDI to GDP have significantly improved the level of CO₂ emission in Asia. In addition, the paper also confirms the existence of the environmental Kuznets curve and that maintaining a surplus trade balance will help reduce CO₂ emissions in a country. These empirical insights are particularly interesting to policymakers since they help build sensible policies about economic growth, energy conservation, and foreign direct investment to improve environmental quality.
  Keywords: international trade; environmental pollution; FEM; environmental Kuznets curve; EKC; pollution haven hypothesis.
  DOI: 10.1504/IJSE.2025.10061128