Synergistic Role of FinTech and Green Finance in CO2 Emissions Reduction in Pakistan

Abstract

The escalating threat of climate change necessitates innovative financial and technological strategies to reduce carbon emissions while sustaining economic growth. This study investigates the synergistic role of financial technology (fintech) and green finance in mitigating CO₂ emissions in Pakistan using annual time-series data from 1995 to 2023. Employing the ARDL bounds testing approach, the research examines both short-run and long-run dynamics among CO₂ emissions, fintech adoption, green finance, population growth, and industrialization. Empirical results indicate that fintech and green finance significantly reduce CO₂ emissions by enhancing financial inclusion, improving resource allocation, enabling real-time monitoring, and directing investments toward low-carbon technologies and sustainable infrastructure. Conversely, population growth and industrialization exert upward pressure on emissions. Model diagnostics confirm robustness, with no evidence of autocorrelation, heteroskedasticity, or misspecification. The findings suggest that integrating digital financial systems with environmentally focused investment policies can promote sustainable economic development and effective decarbonization. Policymakers are encouraged to strengthen digital financial infrastructure, expand green financial instruments, and implement coordinated strategies to manage demographic and industrial pressures.