Financial Sector Development, Institutional Quality and Environmental Degradation in Namibia

Brigitte Fikunawa; SYDEN MISHI

doi:10.12688/f1000research.166902.3

Home Browse Financial Sector Development, Institutional Quality and Environmental...

ALL Metrics

Views

Downloads

Get PDF

Get XML

Export

▬

✚

Research Article

Revised

Financial Sector Development, Institutional Quality and Environmental Degradation in Namibia

[version 3; peer review: 2 approved with reservations, 2 not approved]

Brigitte Fikunawa ¹, SYDEN MISHI¹

PUBLISHED 24 Jun 2026

Author details Author details

¹ Business and Economic Science, Nelson Mandela University, Port Elizabeth, Eastern Cape, South Africa

Brigitte Fikunawa
Roles: Conceptualization, Data Curation, Formal Analysis, Investigation, Methodology, Project Administration, Software, Validation, Visualization, Writing – Original Draft Preparation

SYDEN MISHI
Roles: Supervision, Writing – Review & Editing

OPEN PEER REVIEW

REVIEWER STATUS

Abstract

Background

Environmental degradation, which is the deterioration of ecological quality due to increased unsustainable economic activities, is a global concern that poses a threat to humanity. Like many African countries, Namibia is severely affected by environmental degradation, an arid, lower-middle-income country in sub-Saharan Africa with 16 percent land covered by desert. Therefore, understanding the dynamics between financial development, institutional quality, and environmental degradation.

Methods

This study examines the impact of financial development and institutional quality on environmental degradation in Namibia, using time series data spanning the period from 1990 and 2023. The study used ARDL approach to examine the short and long run relationship.

Results

The findings show that institutional quality increases environmental degradation, as it has a scale effect whereby institutional quality reduces barriers and encourages mining, oil and gas and carbon-intensive industrialisation. This aligns with the notion that climate change is not a result of only economic activities, highlighting that institutional strength alone cannot guarantee reduction in environmental degradation, but it depends whether they prioritise ecological sustainability or economic development. However, financial sector development often supports novel and sophisticated investment products and preserves the environment supporting green technology and renewable energy.

Conclusion

Therefore, this study recommends that Namibia strengthen institutional and regulatory frameworks to promote environmental sustainability through a just transition approach, while supporting financial innovations such as green bonds and emission credit mechanisms to mitigate environmental degradation. Additionally, the study encourages environmental, social, and governance (ESG)-led business investments through enhanced sustainability reporting requirements for listed firms, as these measures support the principles of sustainable development and the triple bottom line rather than prioritising profit maximisation alone.

Keywords

environmental degradation, natural resources rent, institutional quality, financial sector development, renewable energy, Climate change, Climate justice

Corresponding author: Brigitte Fikunawa

Competing interests: No competing interests were disclosed.

Grant information: The author(s) declared that no grants were involved in supporting this work.

Copyright: © 2026 Fikunawa B and MISHI S. This is an open access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

How to cite: Fikunawa B and MISHI S. Financial Sector Development, Institutional Quality and Environmental Degradation in Namibia [version 3; peer review: 2 approved with reservations, 2 not approved]. F1000Research 2026, 14:781 (https://doi.org/10.12688/f1000research.166902.3) First published: 11 Aug 2025, 14:781 (https://doi.org/10.12688/f1000research.166902.1) Latest published: 24 Jun 2026, 14:781 (https://doi.org/10.12688/f1000research.166902.3)

Revised Amendments from Version 2

The introduction has been adjusted to include further context and cross-reference with the theoretical perspective as suggested by the reviewers. The data and methodology have been expanded to include justification of the variables and their proxies, as well as the suitability of the methodological approach. The results and interpretation have been aligned, especially the sign for institutional quality and its interpretation. Furthermore, robustness checks have been added to ensure the reliability of the ARDL results.

See the authors' detailed response to the review by Rui Alexandre Castanho
See the authors' detailed response to the review by Tafirenyika Sunde
See the authors' detailed response to the review by Muntasir Murshed

1.

Introduction

Environmental degradation as a result of climate change is at the forefront of policy discussions at the academic, scientific, and policy levels (Sakariyahu et al., 2024). The impact of economic activities, especially land use and transportation, on climate change has reached unprecedented levels (IPCC, 2019). As such, the quality of the environment reflects the extent to which increased economic activities, especially dependence on natural resources and unsustainable energy sources, inflict danger to the environment (Amer et al., 2024). While Ngarava (2021) argued that increased economic activity is a threat to environmental sustainability, the theoretical view for this relationship is contested (see Zhang et al., 2024; Burgess and Barbier, 2025). The Environmental Kuznets Curve (EKC) suggests that institutional framework and economic advancement eventually lead to environmental recovery (Stern, 2004; Zuo et al., 2022). Additionally, Treadmill of production theory argues that accumulation of capital leads to rent seeking and prioritisation of profit leads to continued industrial expansion to maintain economic growth at the expense of the environment (Curran, 2017; York and Foster, 2005). For low-income countries, characterized by high levels of poverty, inequality, and unemployment, there is pressure for economic development and prioritisation of growth which leads to increased pollution due to limited clean technology adoption for production, sustainable storage, transportation, and waste disposal (Hunjra et al., 2024).

Environmental degradation is varied across jurisdictions, with greatest divide being between global north versus global south (Lauer, Llases, and López-Muñoz, 2025; Li, Wei, Chen et al., 2025). On the other hand, even among peer economies, differences of managing environment, especially ensuring sustainable production, depends on level of financial development and law quality and enforcement (part of institutional quality) (Khan, Weili, & Khan, 2022b; Hussein, Warsame, and Abdi, 2025; Naseer, Hunjra, Palma, and Bagh, 2025). Understanding of this development in the global South context is critical, especially Africa (OSS, 2022; Sakariyahu et al., 2024), and this study advances inquiry in the case of Namibia.

Namibia, like many developing countries, has the least carbon emissions, yet is heavily impacted by climate change as a country with over 90% of it classified as hyper-arid, arid, or semi-arid, ranking second to the Sahara Desert in terms of aridity (World Bank Group, 2021). As a result, communities are prone to catastrophic events such as increased temperature, drought, and floods (World Bank Group, 2021; Government of the Republic of Namibia, 2023). Namibia faces immense pressure to control its ecological footprint, especially in terms of land use, which is the highest emitter of greenhouse gases in the country. Economic activities such as exploration of natural resources are the highest contributor to land use and contribute 14.4% to GDP, more than 50% to export earnings, and 55.9% to government revenue (Bank of Namibia, 2023; Chamber of Mines of Namibia, 2024). While, these resources are crucial for socioeconomic development, dependence on unsustainable economic activities has a consequential impact on the environment. Propelling growth through the extractive primary sector strains the environment (Aladejare, 2022). As such, increased economic activities, such as the use of fossil fuels, exploration, and industrialization, contribute to global warming and environmental degradation (Gutti, Aji and Magaji, 2012; Amer et al., 2024). This has prompted policymakers and governments to encourage sustainable land use management to protect the environment. Although resource rent and other economic activities are beneficial to the economy, they also pose a threat to the environment (Sadaoui et al., 2024). In addition, the financial sector, as an enabling division of the economy with its intermediating role, plays a role in transferring and managing climatic risk; hence, the development of these sectors matters in finding a lasting solution.

Environmental degradation is a result of increased economic activities, production, and exploitation of natural resources. However, it is believed not to be a result of capitalism and economic growth alone but also involves the absence of effective institutional frameworks and policies to deal with greenhouse gas emissions and climate change (Cohen, 2023). Thus, there are calls for institutional frameworks to address the global emission levels of greenhouse gases. According to Hussain and Dogan (2021); Warsame et al. (2022) indicate that institutional quality plays an important role in environmental sustainability. Song et al. (2024) emphasized that environmental quality can be preserved through the implementation of stringent environmental policies that reduce the use of non-renewable energy sources that burden the environment. Contrary, institutional quality contributes to poor environmental management depending on priority of the economy between economic growth and environmental sustainability (Handoyo, 2024). In Namibian, various laws have been implemented to avert environmental degradation, such as Article 95 of Namibia’s Constitution, Environmental Management Act 7 of 2007, the National Policy and Strategy on Climate Change 2011, and the Environmental Assessment Policy 1994. These policies are aimed at environmental protection and dealing with environmental degradation. The theory of Institutions suggests that the presence of institutional frameworks is not sufficient to ensure market functioning (North, 1990). Therefore, presence of institutional framework does not guarantee environmental sustainability. However, the Ecological modernisation theory highlights that financial markets are necessary to provide capital for green innovations, however it requires robust institutions that prioritise enforcement of environmental policies discourage carbon-intensive industrial expansion (Raihan and Sarker, 2026).

The advocacy for investment in green energy and technology to avert environmental degradation has been at the forefront of climate change talks at the United Nations Convention Conferences and Paris Agreement negotiations. Therefore, financial development is critical for investments in projects and technologies that preserve the environment (Imran et al., 2023; Gul and Hussain, 2024). Kirikkaleli and Adebayo (2021) indicates that financial development is crucial for environmental sustainability, as it allows for a shift from traditional to more modern and sustainable practices (Raihan and Sarker, 2026). Given the importance of investment in clean energy, technology, and low-carbon development, Namibia has implemented initiatives such as the 2016 Green Climate Fund (GCF) through the Environmental Investment Fund established under Act 13 of 2001. The GCF has a portfolio of N$ 640 million secured for grant and readiness support by 2023. These funds aim to finance climate change mitigation programs that allow for overall economic development and environmental protection. Despite the legislative framework, and financial commitments, there remain implementation gaps. Therefore, while the country continues to attract FDI into the extractive sector, the allocation of capital toward environmentally friendly and climate-resilient infrastructure remains unclear.

While the literature acknowledges the impact of production and consumption on the environment, current views show that additional factors are responsible for climate change and environmental degradation. Despite the importance of environmental sustainability to our livelihoods, there is a lack of consensus on the influence of policies and finance on the environment. To address the gap, the study utilised the Auto-Regressive Distributed Lag (ARDL) simulation technique and the FMLOS, CCR for robustness to investigate the impact of financial sector development and institutional policies on environmental degradation in Namibia from 1990 to 2023. The study found that while financial sector development reduces environmental degradation in line with the ecological modernisation theory. Institutional quality exacerbates degradation of the environment, contrary, to the EKC hypothesis, therefore the results support the Treadmill of Production Theory, suggesting that Namibia’s institutional frameworks favour economic expansions than environmental protection. The findings provide insight into the effectiveness of institutional frameworks and financing. The study offers guidelines for a holistic approach to creating synergies between these variables to enhance environmental quality and sustainability. Additionally, the research assists policymakers in creating environmentally friendly policies that balances environmental sustainability and the pursuit for economic growth.

The rest of the paper is structured as follows: Section 2 presents the literature review, Section 3 discusses the data and methods, and Section 4 presents the empirical results. Section 5 presents the conclusions and recommendations.

2.

Related literature review

Theoretical literature review

2.1

The Treadmill of production theory highlights the relationship between increased economic activity, natural resource demand, and the environment (Schnaiberg, Pellow and Weinberg, 2002; Islam and Hossain, 2015). It suggests modern political economies are in constant pursuit of economic growth and profit without considering the impact on the environment (Islam and Hossain, 2015; Lewis, 2019). Thus, environmental degradation is due to the direct production demand of state organs, political actors, and the private sector (Curran, 2017; Lewis, 2019). In this theory, public and private sector are interested in rent-seeking and pushing for profit, which leads to the use of machinery to replace labor, leading to increased energy consumption and an increase in ecological harm while decreasing social benefits (Schnaiberg, Pellow and Weinberg, 2002; Islam and Hossain, 2015). In addition, the drive for economic development leads to the increased exploitation of natural resources, waste production, and environmental pollution (Lewis, 2019). Thus, to deal with social problems, the treadmill must increase its capacity and further deepen environmental problems. The environment degradation is influenced by rent-seeking and pursuit for development. Thus, in the context of this study, TPP helps explain that when countries aim to maximise economic output, it leads to environmental damage. However, North’s theory of institutions quality underscores the importance of governance, rule of law, regulatory efficiency and enforcement of property rights can in determining the functioning of the economy (Faundez, 2016; John Nye, 2010). The theory indicates that well-functioning institutions which include high quality environmental policies, incentives and stringent enforcement can deal with environmental degradation. Thus, if institutions designed to favour economic development and income can lead to climate risk and environmental degradation (John Nye, 2010). In this regard, the strength of institutions determines the extent to which a country like Namibia can implement institutional frameworks for environmental protection and ensuring that development is prioritised at the expense of the environment.

Conversely, the Environmental Kuznets Curve suggests a transition in the economy, where economic activities lead to increased environmental degradation, however it eventually reduces (Leal and Marques, 2022). The theory highlights that the harm to the environment is due to the rate of production and lack of sustainable practices for waste reduction and management, therefore as the composition of the economy changes from the primary sector and industrialization to the service sector, pollution levels remain stagnant and decline over time (Sajeev and Kaur, 2020; Leal and Marques, 2022). Furthermore, with the implementation of environmental policies or institutional frameworks, the use of clean energy and technology, and improved waste management, environmental pressure declines and sustainability improves (Stern, 2014; Zuo et al., 2022). Additionally, the Ecological modernisation theory provides a lense through which the adoption and spread of institutional reforms and the environment can be understood. The theory explains that pursuit of economic growth and environmental preservation can coexist, through collaboration between institutional reforms, technological innovation and industrial development (Mol et al., 2014). It argues that the use of technology and green financing can contribute to eco-friendly industrialisation and preserve the environment (Glynn et al., 2017). The theory argues that innovation pressures can transform resource-intensive and environmentally intensive industrial practices to address climate change challenge through institutional framework and market incentives (Baer and Singer, 2022; Glynn et al., 2017). In the context of this study, EMT helps explain how institutional and financial development contributes to reduction of carbon emissions and improve environmental sustainability in developing countries.

Thus, the Treadmill of Production (TOP), Environmental Kuznets Curve (EKC), institutional theory, and Ecological Modernisation Theory (EMT) collectively provide the theoretical foundation for analysing the relationship between institutional quality, financial sector development, and CO₂ emissions in Namibia. While the TOP theory predicts that economic expansion, industrialisation, and financial development increase environmental degradation through resource intensive production and energy consumption, the EKC and EMT perspectives suggest that improvements in institutional quality, technological innovation, and sustainable financial systems can eventually reduce environmental pressure and support environmental sustainability. Therefore, this study attempts to reconcile these competing perspectives by examining whether financial development and economic growth in Namibia intensify environmental degradation as predicted by TOP, or whether institutional quality moderates these effects and promotes environmental sustainability in line with EKC and EMT arguments.

Based on these theoretical perspectives, the study tests the following expectations: first, economic growth and financial sector development are expected to increase CO₂ emissions due to greater production activities and energy demand; second, institutional quality is expected to reduce environmental degradation through effective environmental governance, regulatory enforcement, and sustainable policy implementation; and third, the interaction between financial development and institutional quality is expected to moderate environmental degradation by encouraging green investment, cleaner technologies, and environmentally responsible economic activities.

Namibia provides an important context for testing these theoretical relationships because of its unique environmental and economic structure. As a hyper arid country highly vulnerable to climate change, droughts, desertification, and ecological stress, Namibia faces significant sustainability challenges despite its relatively small population. At the same time, the economy remains heavily dependent on natural resource extraction, mining, energy consumption, and primary sector activities, making the country particularly relevant for examining the tensions between economic development and environmental sustainability. Furthermore, Namibia’s ongoing institutional and financial sector reforms provide an opportunity to assess whether improvements in governance and financial systems can mitigate environmental degradation in a developing country context. Therefore, the Namibian case offers unique insights into the finance, institutions, and environment nexus and contributes to broader debates on sustainable development in resource dependent economies.

Empirical literature review

2.2

Environmental sustainability and achievement of SDG, including the role of institutional quality and financial development, have been at the center of discussion at academic and policy levels, with empirical studies giving opposing views. Akpan and Kama (2024) carried out a panel analysis of high- and low-income economies and found that countries with strong institutions in terms of corruption control, government effectiveness and regulatory quality tend to reduce environmental degradation by prohibiting fossil fuel consumption, whereas those with weak institutions worsen the situation. In BRICS-T economies, Hussain and Dogan (2021); Song et al. (2024) stringent environmental policies and institutional quality can effectively reduce their ecological footprint. Assessing whether innovation and institutional quality can contribute to SDGs in emerging economies (E7), Anwar et al. (2021); Anwar, Malik and Ahmad (2022) institutional quality and innovation impede CO₂ emissions, thus enhancing environmental quality. This signifies that strengthening institutional frameworks inhibits rent-seeking and it will contribute to environmental preservation, thus prioritisation of environmental protection laws is critical in reducing degradation. Furthermore, studies such as Ali et al., (2019); Udemba (2021); Xaisongkham and Liu (2024) reported similar findings that institutional quality and good governance are crucial for environmental sustainability. In developing economies, Xaisongkham and Liu (2024) institutional quality, especially government effectiveness, promotes environmental quality. In contrast, Sibanda et al. (2023) combined institutional quality and natural resource rent in sub-Saharan Africa found that institutional quality increases environmental degradation due to weak institutions. Aydin, Sogut and Erdem (2024) discovered that institutional quality reduces the ecological footprint in certain countries, such as Austria, while it increases the ecological footprint in countries, such as Germany and France. These findings show that highly industrialized countries, such as Germany, which rely on non-renewable energy sources, tend to contribute to an increased ecological footprint and environmental degradation.

Contrary to theories that institutional quality reduces environmental degradation, enhancement in government effectiveness, regulatory quality and political stability are linked to increased emissions in developing countries, as they encourage investment and industrial expansion as such increase environmental impacts (Yaman and Cetin, 2025). Additionally, in both developed and developing economies (Saba et al., 2025; Yuan et al., 2025) found that governance and institutional quality indicators worsen environmental deterioration as increased government efficiency tends to weaken environmental protection as countries prioritise economic development. Handoyo (2024) examined public governance and environmental performance in cross-country study using two-stage least squares and found that different measures of governance has different impact on environmental performance. Voice and accountability, government effectiveness and rule of law are negatively linked to environmental performance as with strong institutional frameworks they may lead to conflicting priorities and lead to focus on socio-economic issues. However, political stability and regulatory quality enhance environmental sustainability by guiding economic activities and enforcing policy implementation.

Using the common correlated effects mean group in emerging Asian economies (Rashid, 2025; Zhang et al., 2024), concludes that institutional quality is a large contributor to per capita carbon emissions and when interacting with economic diversification it contributes to environmental degradation. The findings depict that good institutional quality facilitate diversification of the economy resulting in enhanced emissions from the various economic activities. Mixed impact was found in Africa, as (Yeboah et al., 2024) used multiple advanced regression modelling techniques to assess government policies, biocapacity and CO₂ emissions reduction. In countries such as Algeria, Botswana, South Africa, Angola, Cameroon, Tanzania, Kenya, Zambia, Ghana, Cameroon, Guinea, and Togo government policies promote quality environment. However, government policies in Burkina Faso, Sierra Leon, Cote d’Ivoire, Nigeria, Mali, Uganda, Rwanda, and Libya causes an increase in CO₂ emissions. Similarly, (Obobisa et al., 2022), supports that institutional quality derails environmental protection in Africa as they contribute to CO₂ emissions. The findings shows that in certain African countries policies on environmental preservation face resistance due to prioritisation of economic development and encourage increased emissions, while in others they promote efficiency in production and provide incentives for environmental protections.

SDGs 13 calls for financial sector development or finance accessibility to deal with climate change and environmental degradation. A cross-analysis study Zuo et al. (2022) found that financial development is detrimental to the environment in low- and high-income countries due to the capacity of funding in developing economies, while developed economies continue to invest in non-renewable energy sources. In middle-income economies, they find that financial development is crucial for environmental sustainability. In sub-Saharan Africa, Habiba and Xinbang (2022) financial sector development in its entirety is detrimental to the environment; however, financial institutions’ development in terms of access, depth, and efficiency contributes to environmental degradation more than financial market development, as the availability of credit can encourage consumption and production using outdated technologies, and also due to a lack of environmental protection regulations. Similarly, Ganda (2022) financial sector development is linked to increased carbon emissions in BRICS countries. Additionally, Tran et al. (2023) financial development leads to environmental degradation in ASEAN countries.

A nonlinear relationship between financial sector development in terms of green financing and environmental degradation was found in China, as Huang and Guo (2023) found that green financing encourages CO₂ emissions in the short run but encourages environmental sustainability in the long run. However, in terms of traditional financial development, it leads to environmental degradation, as funding tends to be channelled to pillar industries with high emissions, other than low-carbon industries (green industries) with low survival rates. However, Raihan (2023) financial development was found to have a negative relationship with environmental deterioration, thus reducing environmental degradation. Usman, Makhdum and Kousar (2021) revealed that financial development contributed to a reduction in environmental degradation and enforced sustainability. Similarly, Kirikkaleli and Adebayo (2021) it was found that financial development, in terms of green financing and credit, enhances environmental quality due to investment in clean energy and technologies.

Combining financial development and institutional quality Amin et al., (2022) found that governance and financial development reduced carbon emissions. In MENA countries (Awdeh, 2022), it was found that financial development, good governance, and quality institutional systems can mitigate pollution and environmental degradation and that the combination of these factors has a more significant impact on controlling the carbon footprint and achieving environmental sustainability. In contrast, Ahmad et al. (2022) indicates that financial development is detrimental to the environment, whereas institutional quality reduces carbon emissions and ensures sustainability. However, the joint impact of financial development and institutional quality has a negative effect on carbon emissions, indicating that institutional quality has a moderating effect, reducing the negative impact of financial development as such strong regulations and institutions enable the implementation of regulations on finance for environmental protection and ease green financing and investment. A global analysis Khan, Weili and Khan (2022a) found that financial sector development and institutional quality individually contribute to increased carbon emissions; however, the interaction between the two indicates that they can reduce carbon emissions through the facilitation of environmentally friendly projects and green investment.

Literature on financial sector development, institutional quality, and environmental degradation presents mixed and sometimes contradictory findings. Prempeh et al. (2023) found that banking sector development contributes to environmental degradation through increased industrial activities and energy consumption, although technological advancement can help mitigate these effects. Similarly, Prempeh (2024) revealed that financial development and economic growth increase environmental pressure when supported by carbon intensive industrialisation and unsustainable production systems. In contrast, Khan, Weili and Khan (2022b) found that institutional quality can moderate the negative environmental effects of financial development through environmental regulations, governance effectiveness, and support for green investment. Likewise, Hussein, Warsame and Abdi (2025) showed that weak institutional systems contribute to environmental pollution, suggesting that governance quality is important for environmental sustainability in developing countries. Naseer et al. (2025) also found that governance quality and energy policies contribute significantly to improving environmental performance and sustainable development outcomes.

The broader environmental sustainability literature also highlights tensions between economic development and environmental protection. Stern (2004), through the Environmental Kuznets Curve hypothesis, argues that environmental degradation initially increases with economic growth before declining as economies adopt cleaner technologies and stronger environmental institutions. However, Burgess and Barbier (2025) criticise this assumption by arguing that economic growth alone does not guarantee environmental sustainability, particularly in developing economies characterised by weak institutions and resource dependence. Similarly, Zhang et al. (2024) found that emerging economies continue to struggle in balancing economic competitiveness with environmental sustainability due to dependence on carbon intensive production systems. Sakariyahu et al. (2024) further demonstrated that environmental degradation in Africa extends beyond emissions to include ecological stress, land degradation, and reduced quality of life. In addition, Li et al. (2025) highlighted persistent environmental inequalities between the Global North and Global South, where developing countries experience greater environmental vulnerability despite lower historical emissions contributions. Lauer, Llases and López Muñoz (2025) also argue that global environmental governance frameworks often fail to fully address the environmental realities and developmental challenges facing poorer economies.

Therefore, literature on institutional quality, financial sector development, and environmental degradation remains inconclusive and context dependent. While some studies suggest that financial development worsens environmental degradation through increased production and energy demand, others indicate that strong institutional quality and sustainable financial systems can mitigate environmental harm through green investment and effective environmental governance. Furthermore, most existing studies rely on cross country panel analyses and place limited attention on environmentally vulnerable and resource dependent economies such as Namibia. Consequently, there remains a knowledge gap regarding how financial sector development and institutional quality interact to influence environmental degradation within Namibia’s unique context of hyper aridity, resource extraction, and ecological vulnerability.

Literature review on the impact of institutional quality and financial sector development on environmental degradation shows mixed impact as such reveals knowledge gaps in understanding the influence of institutional framework and finance on the environment. While from the theoretical underpinning institutional quality reduces environmental degradations, the literature highlighted mixed impact both negative and positive suggesting the context and nature of institutions are critical. Additionally, the impact of financial sector development on environment varies depending on the type of financial development in terms of green or traditional financing as well as the country. While the impact varies, for both variables, the study is based on the past theoretical underpinnings and hypothesises as follows:

Hypothesis 1:

Institutional quality negatively impacts environmental degradation

Hypothesis 2:

Financial sector development negatively impacts environmental degradation

3.

Data and methods

This study used time-series data from 1990 to 2023 in Namibia to investigate the impact of institutional quality and financial development on environmental degradation. The data are sourced from World Bank Databases (WDI) and the Fraser Institute databases. This study used carbon dioxide (CO₂) per capita emissions as a proxy for environmental degradation, as it is a major contributor to environmental change and has been widely used in empirical studies examining the relationship between economic growth, financial development, and environmental outcomes (Sida, 2011; Doğan, Saboori and Can, 2019; Tran et al., 2023; Gul and Hussain, 2024). This study used CO₂ as a proxy due to data constraints relating to broader environmental indicators such as ecological footprint and land degradation indices. Although Namibia’s major environmental challenges include desertification, land degradation, droughts, and ecosystem stress, consistent long term data for these indicators remain limited. Nevertheless, given Namibia’s dependence on mining, fossil fuel based energy consumption, and resource intensive economic activities, CO₂ emissions remain a relevant and consistent measure of emission related environmental degradation. Furthermore, institutional quality was measured using the Worldwide Governance Indicators, which capture dimensions such as government effectiveness, regulatory quality, rule of law, and control of corruption, reflecting the role of governance in supporting environmental sustainability and policy implementation. The independent variables includes institutional quality (IQ) proxied by economic freedom index which assigns scores up 10; where 10 indicates high quality while 0 indicates low quality as adopted from Dube and Horvey (2023). The index includes various institutional quality characteristics such as rule of law, government size, regulatory efficiency, market openness. The index measures both government efficiency and enforcement of regulation in a resource dependent country where the government intervention in economic activities and resource management plays a role in environmental outcomes. Other proxies from World Governance Indicators (WGI) only starts from 1996, the use of EFI allows to capture post-independence and give which are commonly used have data limitations as such EFI allows a broader analysis. Credit to the private sector (%GDP) as an indicator of financial sector development (FSD), adopted from studies such as Amin et al. (2022), Awdeh (2022), and Khan, Weili and Khan (2022a). Other explanatory variables included renewable energy consumption (% of total usage) (REC), GDP per capita (constant 2015 US$) as proxy of economic growth (GDP), and trade openness (% of GDP) (TO). All the variables have been transformed to natural logarithm form for easy analysis. Given data constraints for REC the analysis are carried out on common sample. This study acknowledges that the relatively small sample size of approximately 31 to 34 observations may present limitations for time series estimation and statistical inference. Small sample sizes can reduce statistical power and increase the possibility of unstable coefficient estimates, particularly in models with multiple parameters such as the ARDL framework. However, the ARDL approach remains appropriate for this study because it is widely recognized for its suitability in small sample time series analysis and for variables integrated at different orders, provided none are integrated beyond I(1). Furthermore, diagnostic and stability tests were conducted to assess the reliability and robustness of the estimated model. The data and its sources are presented in Table 1. The model used in the study, informed/adapted from Amin et al. (2022) and modified, is presented as follows:

(1)

ln {CO}_{2_{t}} = β_{0} + β_{1} {lnIQ}_{t} + β_{2} {lnFSD}_{t} + β_{3} {lnTO}_{t} + β_{4} {lnREC}_{t} + β_{5} {GDP}_{t} + ϵ_{t}

Table 1. Data sources and description.

Variables	Code	Description	Source
Environmental degradation	CO₂	Carbon dioxide (CO₂) (metric tons per capita)	WDI
Institutional quality	IQ	Economic Freedom Index (0-10)	Fraser Institutte
Financial sector development	FSD	Credit to private sector (% of GDP)	WDI
Renewable energy consumption	REC	Renewable energy consumption (% of total electricity)	WDI
Trade Openness	TO	Trade openness (% of GDP)	WDI
Gross Domestic Product growth	GDP	Real Gross Domestic Products per capita (Constant 2015 USD)	WDI

Table 2 presents descriptive statistics of the variables used in this study. Due to data limitation for the Renewable energy consumption % of total electricity, the study used the common period of 31 observations.

Table 2. Descriptive statistics.

	lnCO₂	lnIQ	lnTO	lnREC	lnFSD	lnGDP
Mean	1.348	6.065	93.814	32.858	45.798	8.202
Median	1.286	6.345	93.560	31.900	47.371	8.239
Maxi.	1.812	6.812	123.762	42.500	60.586	8.470
Mini.	0.789	4.423	76.925	29.200	19.333	7.978
Std. Dev.	0.297	0.676	10.721	3.140	8.376	0.173
Skewness	0.087	-1.347	0.934	1.427	-0.869	0.054
Kurtosis	2.029	3.580	3.997	4.736	4.575	1.435
Obs.	31	31	31	31	31	31

To select suitable estimation techniques for the study, a unit root test was adopted, as economic and financial data are not stable and thus contain outliers. Economic and financial data tend to be non-stationary and can lead to spurious estimations. Therefore, data must be stationary to produce reliable results. In addition, it allows us to choose a suitable estimation approach based on the order of integrations at levels I(0), first difference I(1), or second difference I(2). The study used the Dickey-Fuller, augmented Dickey-Fuller, and Phillips–Perron (P–P) methods to ensure robustness of the results and allow the majority rule to apply where conflicting order of integration exists.

This study used ARDL estimation techniques to examine the relationship between NRR, FSD, IQ, and environmental degradation. ARDL is preferred because it allows the use of a mixed order of integration of either I(0) or I(1) (Pesaran et al., 2001). In addition, ARDL is recommended because it reduces the issue of misspecification, spurious, and random errors that can occur because of non-stationary data (Nkoro and Uko, 2016). Furthermore, ARDL allows for bound tests to assess whether cointegration exists as dependent and independent variables, even when integrated at different orders of integration (Pesaran et al., 2001). Additionally, ARDL approach is suitable for small sample size, its flexible and unlike the Johansen and Juselius’s and the Engle and Granger’s cointegrations, as it allows for both long term and short term cointegrations to be regressed simultaneously (Nkoro and Uko, 2016; M. H. Pesaran et al., 2001). To examine the existence of cointegration, this study proposes the following hypothesis:

HO : β_{1 i} = β_{2 i} = β_{3 i} = β_{4 i} = β_{5 i} = 0

H 1 : β_{1 i} \neq β_{2 i} \neq β_{3 i} \neq β_{4 i} \neq β_{5 i} \neq 0

Pesaran, Shin and Smith (2001) provides critical values to be tested against the F-statistic. Lower bound I(0) and upper bound I(1). Pesaran, Shin and Smith (2001) indicate that when the F-statistic is below the lower bound, the null hypothesis indicates that no cointegration exists, and when it falls between the upper and lower bounds, the results are inconclusive, as none of the hypotheses are accepted. However, when the F-statistic is larger than both critical values, the alternative hypothesis is accepted, which indicates the presence of cointegration (Nkoro and Uko, 2016). As such, if there is evidence of cointegration (long-run relationship), the ARDL-EC model is used to estimate the long-run. The ARDL model used in the study is specified below:

(2)

∆ln {CO}_{2} = a_{0} + \sum_{i = 1}^{n} β_{1 i} ∆ ln {CO}_{2_{t - 1}} + \sum_{i = 1}^{n} β_{2 i} ∆ {lnIQ}_{t - 1} + \sum_{i = 1}^{n} β_{3 i} ∆ {lnFSD}_{t - 1} + \sum_{i = 1}^{n} β_{4 i} ∆ {lnTO}_{t - 1} + \sum_{i = 1}^{n} β_{5 i} ∆ {lnREC}_{t - 1} + \sum_{i = 1}^{n} β_{6 i} ∆ {lnGDP}_{t - 1} + β_{7} ln {CO}_{2_{t - 1}} + β_{8} {lnIQ}_{t - 1} + β_{9} {lnFSD}_{t - 1} + β_{10} {lnTO}_{t - 1} + β_{11} {lnREC}_{t - 1} + β_{12} {lnGDP}_{t - 1} + {μECT}_{t} + ε_{t}

β₁−β₁₂ are short- and long-run parameters, ∆ is the difference operator, ε_t is the error term, and ECT is the Error Correction term. Given the dynamics of time-series data that tend to be serially correlated, this study has carried out serial correlation to ensure that the error terms are serially independent. In addition, the model was assessed for normality and if residuals were homoscedastic. To ensure that the model was stable, a stability test was performed using the CUSUM. The stability test is important in time series analysis, as we cannot predict the structural changes that may have occurred. The Ramsey RESETs test was used to assess the model specifications.

The study applied Fully Modified Ordinary Least Squares (FMOLS), Canonical Cointegration Regressions (CCR), and pairwise Granger causality tests to further assess the reliability of the ARDL model results. The FMOLS used in estimation of long run cointegration among integrated variables which is common in time series analysis (Phillips, 1995). As such, can produce reliable estimations when dealing with time series data which often exhibits non-stationarity. Additionally, FMOLS can address issues of serial correlation and endogeneity in error term (Phillips, 1995; Phillips and Hansen, 1990)s. Therefore, this makes the approach suitable for robustness check for ARDL results. CCR estimates the cointegrating vectors and can account for issues of endogeneity and serial correlation in the error terms as such ensure efficient and consistent estimation of cointegrating relationships (Park, 1992). Additionally, it can correct the asymptotic biasness that arises due to correlation between the regression and stochastics regressor errors. Therefore, together with the FMOLS, CCR was used as a robust estimator to validate the findings from the ARDL model.

4.

Empirical results and discussion

This section discusses the empirical results, which include unit root, cointegration analysis using ARDL, and presentation and discussion of the results for both the short and long coefficients. It also includes diagnostic tests.

Unit root tests, lag length selection and bound cointegration

4.1

Stationarity tests were carried out as presented in Table 2 to ensure that all variables were stationary at either I (0) or I (1), and it was found that all the variables were integrated at either I (0) or I (1), and no variables were integrated at the I(2) order. Among the variables included in the model, carbon dioxide emissions, and GDP per capita demonstrated stationarity at I(1) in all the tests while renewable energy consumption, financial sector development and institutional quality have mixed integration whereby they are integrated at I(0) for ADF and PP while are stationary at I(1) for DF. Additionally, trade openness demonstrated I(0) in terms of ADF and DF and I(1) for PP. Therefore, the results satisfy and validate the ARDL criterion, which allows the use of the ARDL estimation approach.

To ensure accurate and reliable estimation of the bound cointegration test and the error correction term there is a need to establish the optimal lags order. To select the optimal lag length the study used the following lag length criteria such as sequential modified LR test statistic (LR), final prediction error (FPE), Akaike information criterion (AIC), Schwarz information criterion, (SC) and Hannan–Quinan information criterion (HQ). Table 5 illustrates that LR, FPE, AIC and HQ indicate 2 lags at 5% level. Therefore, given that the majority criteria recommend a lag of 2 as optimal, the study used lag 2 as the preferred optimal lag length.

Given the unit root test, the study used the AIC to select the optimal lag length for the Pesaran et al. (2001) ARDL approach to assess the long-run relationship. The bound test results shows that the estimated F-statistics is 19.6874, which is greater than the lower and upper bounds at a 1 and 5 percent levels of significance, indicating the existence of a cointegrating relationship between the dependent and independent variables (see Table 3).

Table 3. Unit root analysis.

	Augmented Dickey-Fuller		Dickey-Fuller		Phillips-Perron (PP)
	Level	1st difference	Level	1st difference	Level	1st difference
lnCO₂	-1.5308	-6.127***	-0.9596	-5.127***	-1.531	-6.120***
lnGDP	-1.134	-3.840***	-0.674	-3.566***	-1.352	-3.847***
lnREC	-3.462**		-1.074	-2.536**	-3.572**
lnFSD	-4.155**		-1.072	-3.419***	-3.438**
lnIQ	-3.454**		-1.128	-2.777***	-3.134**
lnTO	-3.305**		-3.382***		-2.109	-3.187**

Table 4. ARDL bound results.

F-Statistics	Value	K
	19.6874	5
Significance level	Lower bound	Upper bound
1%	4.134	5.761
5%	2.910	4.193
10%	2.407	3.517

Table 5. Lag order criteria.

Lag	LogL	LR	FPE	AIC	SC	HQ
0	-204.5864	NA	0.081766	14.52320	14.80609	14.61180
1	-64.43315	212.6464	6.58e-05	7.340217	9.320439*	7.960398
2	-11.95956	57.90190*	3.01e-05*	6.204107*	9.881662	7.355871*

Estimation of long and short-run coefficients

4.2

With confirmation of the long-run relationship, the study estimated the long and short run.

The results presented in Tables 6 and 7 indicate that GDP growth has a positive and statistically significant relationship with environmental degradation in both the long and short terms. This indicates that a 1% increase in economic growth leads to a 1.54% increase in CO₂ and environmental degradation. The findings are consistent with the Treadmill of production theory, which emphasizes that the pursuit of increased economic growth and profit-seeking because of the exploitation of natural resources and others leads to environmental degradation (Schnaiberg, Pellow and Weinberg, 2002; Lewis, 2019). In addition, it contradicts the EKC theory, which indicates that in the long run, GDP growth is supposed to contribute to environmental sustainability due to the use of clean energy, environmental legal frameworks, and waste management practices (Stern, 2014; Zuo et al., 2022). This finding supports ToP that as economic agents continue to seek profit, they put more pressure on the environment, thus causing climate change and degradation. The findings further reflect Namibia’s current economic situation, which saw increased investment in explorations of natural resources, oil, and gas, taking precedent over economic activities that are environmentally friendly.

Table 6. Long -run coefficients.

Variable	Coefficient	Std. Error	t-Statistic	Prob.
lnREC	-0. 0509	0.0057	-8.8524	0.0000
lnTO	-0.0037	0.0011	-3.4285	0.0021
lnIQ	0.0355	0.0199	1.7786	0.0875
lnGDP	1.5487	0.0948	16.3366	0.0000
lnFSD	-0.0119	0.0032	-3.9405	0.0006
C	-8.9966	0.6241	-14.4133	0.0000

Table 7. Short-run coefficients.

Variable	Coefficient	Std. Error	t-Statistic	Prob.
ECM (-1)	-0.926	0.0695	-13.311	0.0000
Dln(GDP)	0.829	0.1752	4.734	0.0001
Dln(TO)	-0.0005	0.0009	-0.609	0.5471
Dln(FSD)	-0.0048	0.002	-2.128	0.0426
Residual Diagnostics tests
R-squared	0.882	Serial Correlation test (LM test)		1.085 (0.3578)
Adjusted R-squared	0.869	Normality test (Jargue-Bera)		1.470 (0.4794)
D-W stat	1.998	Heteroskedasticity test (Breusch-Pagan-Godfrey)		1.417 (0.2432)
F-statistic	67.857***	Model Specification test (Ramsey RESET)		0.0108 (0.9914)

In addition, financial sector development has a negative relationship in both the short and the long run. This implies that increased financial sector development, in terms of credit access by the private sector, can reduce environmental degradation. The availability and accessibility of financial resources can encourage investment in green energy sources and technologies, as suggested in Raihan (2023) and Usman, Makhdum and Kousar (2021). In addition, financial development is suggested to lower environmental degradation as it can accelerate technological advancement, which can reduce pollution and enhance sustainability (Amin et al., 2022; Prempeh, 2024). The findings further validate the ecological modernisation theory that financial development can contribute to technological innovation and green financing, which transform institutions, modernise economic activities and contribute to eco-friendly industrialisation (Mol et al., 2014). As outlined in the literature, the results suggest that a more developed financial sector in Namibia can mitigate environmental degradation through investment in green technologies and energy sources. Furthermore, the findings provide justification for the green hydrogen and the introduction of new green financing mechanisms in Cactus farming and solar energy production that are being developed in the country currently. Therefore, the finding further justifies that financial development for the green economy can actually mitigate carbon emissions and achieving the SDGs in climate action. These further support the ecological modernisation views that green financing can reduce degradation due to innovation in terms of green technology.

Moreover, institutional quality is positively related to environmental degradation, suggesting that it exacerbates environmental degradation. The results are contrary to theories, as improved governance is expected to reduce environmental degradation, however, in the context of economic development, improved institutions in terms of government effectiveness, regulatory quality enhance economic stability in a country, attract investment and promote industrialisation. Therefore, if a country prioritises economic development, it can encourage large scale economic activities and relaxes environmental protection measures. This is supported by Kumar et al. (2021) who found that institutional quality is unable to reduce environmental degradation in the presence of corruption. Corruption is rampant in global South economies and is not reflected in the institutional quality measured in this study which is economic freedom. The results align with In line with the results for the previous period (Saba et al., 2025; Sibanda et al., 2023; Yaman and Cetin, 2025), the rules and regulations set by governments have not been implemented to reduce environmental degradation. However, it contradicts Aydin, Sogut and Erdem (2024), Akpan and Kama (2024), that institutional quality encourages environmental sustainability. Additionally, North argues that institutions reduce transactional cost to facilitate economic exchange, thus it does not guarantee environmental sustainability, thus the efficiency is based on the priority of government (John Nye, 2010). Therefore, based on the findings, in the context of Namibia high quality institutional frameworks and institutions may incentivise and prioritise economic development, thus high institutional quality will lead to conducive environment for increased economic activities. Thus, quality institutions reduce transaction cost for mining, oil and gas explorations. This explains that better institutional quality is facilitating the expansion of carbon-intensive economic activities, as such prioritises economic development over ecological preservation. Therefore, environmental degradation is not only a product of economic activities, but also of the structures and functioning of institutions (Cohen, 2023).

The results show that the consumption of renewable energy can reduce environmental degradation as it has a negative and statistically significant relationship with environmental degradation in both the long and short run. This implies that an increase in energy consumption from renewable sources leads to a decline in carbon emissions and ecological footprint. However, the relationship was positive in the previous period in the short term. The findings are similar to those for Kirikkaleli and Adebayo (2021); Achuo, Miamo and Nchofoung (2022); Habiba and Xinbang (2022) the consumption of renewable energy that dampens greenhouse gas emissions, such as reduced environmental degradation. Furthermore, the findings show that increased investment in renewable energy production and initiatives, such as green hydrogen and solar energy, can contribute to environmental sustainability. This supports the ecological modernisation theory that technological innovation, institutional reform and investment in clean energy balances economic growth and environmental protection.

In terms of trade openness, the relationship with environmental degradation is negative. These results suggest that trade openness can shift cleaner production technologies to Namibia, which enhances environmental sustainability. These results are consistent with those of the Karedla, Mishra and Patel (2021); Shakeel and Nobre (2024) and Thi, Pham and Nguyen (2024).

Based on the overall findings, while Namibia’s economy lean towards the Trademill of production, as the country remains generally resourced dependent. However, the results for FSD and REC show that the impact of variables on environment in terms of ecological modernisation is present although it is not sufficient to offset the growth-led degradation. The error correction measures the speed of adjustment from short to long run. The ECT value is negative and statistically significant at -0.9260, indicating that 92.60 percent convergence speed from short run to long run stable equilibrium. This implies that full equilibrium will be reached in about 1.079 years.

The value of the R² and adjusted R² as per Table 7, were estimated to be 88 and 87 percent, which confirms that the model is a good fit. The F-statistics are estimated at 67.857. Furthermore, diagnostics tests such as serial correlation, heteroskedasticity, model specification and stability and normality test are presented in Table 7. It is observed that the ARDL model has met all the criteria as such passed all diagnostics as such is no serial correlation, and the error terms are homoscedastic. Additionally, the model was correctly specified, and the residuals in the models were normally distributed according to the normality test. Meanwhile, the stability test using CUSUMs which shows stability of the model as the plot is between the critical boundaries at 5 percent level of significance as presented in Figure 1. Therefore, the diagnostics tests confirm that the short and long run parameters are accurate.

Figure 1. CUSUM.

Granger causality

4.3

The Granger causality results as presented in Table 8, revealed a unidirectional causality from renewable energy, institutional quality, and GDP to environmental degradation. This suggests that energy transition, economic growth, and institutional quality can predict environmental outcomes. The findings show that institutional frameworks are leading indicators of environmental degradation. Additionally, environmental degradation and financial sector development has a bidirectional causality indicating that they are interlinked and have a feedback effect. If further suggest that the provision for green financing can reduce carbon emissions and the environment stabilise.

Table 8. Granger causality results.

Dependent variables	Independent variables	F-statistic	Prob.
lnCO₂	lnREC	8.2497	0.0162
lnREC	lnCO₂	0.1054	0.9486
lnCO₂	lnTO	5.590	0.0611
lnTO	lnCO₂	1.9626	0.3748
lnCO₂	lnIQ	4.045	0.1323
lnIQ	lnCO₂	8.871	0.0118
lnCO₂	lnGDP	12.201	0.0022
lnGDP	lnCO₂	3.3182	0.1903
lnCO₂	lnFSD	8.486	0.0087
lnFSD	lnCO₂	26.194	0.000
lnREC	lnTO	0.3697	0.8312
lnTO	lnREC	1.0596	0.5887
lnREC	lnIQ	1.3407	0.5115
lnIQ	lnREC	3.9868	0.1362
lnREC	lnGDP	0.3077	0.8573
lnGDP	lnREC	5.3137	0.0701
lnREC	lnFSD	0.8811	0.6436
lnFSD	lnREC	21.023	0.0000
lnTO	lnIQ	1.0471	0.5923
lnIQ	lnTO	9.5796	0.0083
lnTO	lnGDP	1.2783	0.5277
lnGDP	lnTO	3.3574	0.1866
lnTO	lnFSD	1.0268	0.5984
lnFSD	lnTO	10.6944	0.0048
lnIQ	lnGDP	20.2674	0.000
lnGDP	lnIQ	4.2294	0.1206
lnIQ	lnFSD	2.5592	0.2781
lnFSD	lnIQ	7.5045	0.0234
lnGDP	lnFSD	3.4577	0.1774
lnFSD	lnGDP	12.104	0.0023

Robustness check

4.4

To assess the robustness of the ARDL results, the FMOLS and CCR test were performed as presented in Table 9. The results confirm the ARDL results that institutional quality and GDP have a positive long run relationship with environmental degradation, suggesting that they contribute to environmental degradation, although insignificant with institutional quality. Renewable energy consumption, financial sector development and trade openness reduce environmental degradation.

Table 9. Robust tests results.

	FMOLS	CCR
Variables	Coef.	Coef.
lnREC	-0.045***	-0.0453***
lnTO	-0.0027***	-0.0028***
lnIQ	0.0135	0.0139
lnGDP	1.4012***	1.4081***
lnFSD	-0.0060***	-0.0064***
C	-8.2240	-8.2450***
R-squared	0.9702	0.9701
Adjusted R-squared	0.9641	0.9639
S.E. of regression	0.0537	0.0537
Long-run variance	0.0012	0.0012

5.

Conclusion

The essence of environmental sustainability and concerns regarding the impact of environmental degradation on humanity prompted the study to investigate Namibia. Namibia, like many developing countries, has the least carbon emissions, yet is heavily impacted by climate change as a country with over 90% of it classified as hyper-arid, arid, or semi-arid, ranking second to the Sahara Desert in terms of aridity (World Bank Group, 2021). As a result, communities are prone to catastrophic events such as increased temperature, drought, and floods (World Bank Group, 2021; Government of the Republic of Namibia, 2023). Therefore, this study examined the impact of financial sector development and institutional quality on environmental degradation. The following conclusions and recommendations were drawn:

• Institutional quality improvements contribute to significant increases in carbon emissions and environmental degradation, as the institutional frameworks prioritise rent-seeking and the pursuit of economic development over ecological sustainability. This focus often leads to increased emissions of greenhouse gas emissions and environmental neglect.

The findings suggest that current institutional frameworks exert the scale effect, where regulatory efficiency promotes carbon-intensive industrialisation and resource exploration. Therefore, for Namibia to reduce environmental degradations and achieve environmental sustainability, the country should undergo institutional reforms that ensure that the country moves away from growth focused policies towards balancing growth and environmental protection. The current policy frameworks on environmental protection have not been highly effective; the national laws prioritise industrialisation and economic expansion and which leads to pressure on the environment. Therefore, policymakers should strengthen institutional quality by promoting sustainable development which can reduce negative environmental impacts. Furthermore, based on the findings developing countries must incorporate financial globalization into environmental protection frameworks to adopt international green standards that penalise environmental destruction. Therefore, given the impact of institutional quality on the environment, there is a need to link environmental protection and investment law, to attract green economic activities that contribute to development and environmental sustainability.

• Financial sector development presents a positive impact on the environment. In both the short- and long-run financial development reduces environmental degradation, as such contribute to environmental sustainability.

Environmental sustainability relies heavily on access to finance for advanced technologies and means of production. Developing countries are most impacted by climate change; however, they have limited financial capacity. Thus, there is a concerted effort by developing countries to continue to persuade advanced economies to increase climate change financing as they lack domestic liquidity to fund climate mitigation projects, while they are the most impacted by environmental degradation. Thus, it is imperative that countries proactively invest in clean energy. Domestically government, through the central bank, should implement green credit guidelines providing preferencial climate loans with special conditions to commercial banks that provide financing for environmentally friendly technologies. Thus, by improving financial accessibility and inflow into clean energy investments can reduce dependence on non-renewable energy. The research, therefore, offers insight and contributes to policy and literature by providing a view on the importance of finance and institutional frameworks in environmental protection and the need to create a balance between economic development and environmental sustainability.

The current study focuses on Namibia; however, its implications can be applied to other contexts. Therefore, future studies should incorporate other measures of environmental degradation, such as the ecological footprint or other forms of greenhouse gases. Furthermore, institutional quality might not be adequately captured as the study used economic freedom index and not the measure by the World Governance, as such future study may use other measure of governance to measure institutional quality. Additionally, although the study used multiple econometric models, the complexity of the relationship may not be fully captured as such future studies can incorporate other control variables such as resources rent to assess whether the relationship might be different. Further studies can apply asymmetric relationships, as the impact may be influenced by changes in a country’s economic or political atmosphere.

Ethics and consent statement

Ethical approval and consent were not required.

Data availability statement

The project contains the following underlying data: Mendeley data: FSD & IQ and Environmental degradation. https://data.mendeley.com/datasets/4prx3cr2ss/3 (Fikunawa, 2026).

The project contains the following underlying data: Book1(1).xlsx.

Extended data

Mendely data: FSD & IQ and Environmental degradation. https://data.mendeley.com/datasets/4prx3cr2ss/3 (Fikunawa, 2026).

This project contains the following extended data: SUPPLIMETARY DATA (2).xlsx

Data are available under the terms of the Creative Commons Attribution 4.0 International license (CC-BY 4.0).

References

Achuo ED, Miamo CW, Nchofoung TN: Energy consumption and environmental sustainability: What lessons for posterity? Energy Rep. 2022; 8: 12491–12502. Publisher Full Text
Ahmad M, et al.: Financial development and environmental degradation: Do human capital and institutional quality make a difference? Gondwana Res. 2022; 105: 299–310. Publisher Full Text
Akpan U, Kama U: Does institutional quality really matter for environmental quality ? Energy & Environment. 2024; 35(8): 4361–4385. Publisher Full Text
Aladejare SA: Natural resource rents, globalisation and environmental degradation: New insight from 5 richest African economies. Res. Policy. 2022; 78(June): 102909. Publisher Full Text
Ali HS, et al.: Financial development and carbon dioxide emissions in Nigeria: Evidence from the ARDL bounds approach. GeoJournal. 2019; 84(3): 641–655. Publisher Full Text
Amer EAAA, et al.: The impact of natural resources on environmental degradation: a review of ecological footprint and CO₂ emissions as indicators. Front. Environ. Sci. 2024; 12(March): 1–14. Publisher Full Text
Amin A, et al.: Financial Development, Institutional Quality, and the Influence of Various Environmental Factors on Carbon Dioxide Emissions: Exploring the Nexus in China. Front. Environ. Sci. 2022; 9(February): 1–10. Publisher Full Text
Anwar A, et al.: Modelling the Macroeconomic Determinants of Carbon Dioxide Emissions in the G-7 Countries: The Roles of Technological Innovation and Institutional Quality Improvement. Glob. Bus. Rev. 2021;26: 823–845 [Preprint]. Publisher Full Text
Anwar A, Malik S, Ahmad P: Cogitating the role of Technological Innovation and Institutional Quality in Formulating the Sustainable Development Goal Policies for E7 Countries: Evidence from Quantile Regression. Glob. Bus. Rev. 2022 [Preprint]. Publisher Full Text
Awdeh A: The Impact of Financial Development and Institutional Quality on Environmental Conditions: Evidence from the MENA Region. Review of Middle East Economics and Finance. 2022; 18(2): 81–105. Publisher Full Text
Aydin M, Sogut Y, Erdem A: The role of environmental technologies, institutional quality, and globalization on environmental sustainability in European Union countries: new evidence from advanced panel data estimations. Environ. Sci. Pollut. Res. 2024; 31(7): 10460–10472. PubMed Abstract | Publisher Full Text | Free Full Text
Bank of Namibia: Bank of Namibia Annual Report 2023. Windhoek; 2023.
Burgess JC, Barbier EB: Sustainability and environmental economics: A status quo. In Banerjee A, editor. Oxford Research Encyclopedia of Economics and Finance. Oxford University Press; 2025. Publisher Full Text
Chamber of Mines of Namibia: Annual Review of the Chamber of Mines of Namibia 2023. Windhoek; 2024.
Cohen S: Environmentally Sustainable Growth: A Pragmatic Approach. :Columbia University Press; 2023.
Curran D: The Treadmill of Production and the Positional Economy of Consumption. Can. Rev. Sociol. 2017; 54(1): 28–47. PubMed Abstract | Publisher Full Text
Doğan B, Saboori B, Can M: Does economic complexity matter for environmental degradation? An empirical analysis for different stages of development. Environ. Sci. Pollut. Res. 2019; 26: 31900–31912. PubMed Abstract | Publisher Full Text
Fikunawa B: FSD & IQ and Environmental degradation. Mendeley Data. 2026; V3. Publisher Full Text
Ganda F: The nexus of financial development, natural resource rents, technological innovation, foreign direct investment, energy consumption, human capital, and trade on environmental degradation in the new BRICS economies. Environ. Sci. Pollut. Res. 2022; 29(49): 74442–74457. PubMed Abstract | Publisher Full Text | Free Full Text
Government of the Republic of Namibia: Namibia’s Nationally Determined Contribution 2023. Windhoek; 2023.
Gul R, Hussain S: Unlocking sustainable futures: Exploring the non-linear linkages between green finance and environmental sustainability in developing countries. J. Environ. Manag. 2024; 370(September): 122971. PubMed Abstract | Publisher Full Text
Gutti B, Aji MM, Magaji G: Environmental Impact of Natural Resources Exploitation in Nigeria and the Way Forward. Journal of Applied Technology in Environmental Sanitation. 2012; 2(2): 95–102.
Habiba U, Xinbang C: An Investigation of the Dynamic Relationships Between Financial Development, Renewable Energy Use, and CO₂ Emissions. SAGE Open. 2022; 12(4): 1–21. Publisher Full Text
Huang J, Guo L: Analysis of the impact of natural resource rent, transportation infrastructure, innovation and financial development on China’s carbon emission. Energy and Environment. 2023; 34(6): 1805–1825. Publisher Full Text
Hunjra AI, et al.: Economic growth and environmental sustainability in developing economies. Res. Int. Bus. Financ. 2024; 70: 102341. Publisher Full Text
Hussain M, Dogan E: The role of institutional quality and environment-related technologies in environmental degradation for BRICS. J. Clean. Prod. 2021; 304: 127059. Publisher Full Text
Hussein HA, Warsame AA, Abdi AH: Exploring the impacts of institutional quality, urbanization, and disaggregate globalization on environmental pollution in Somalia. Cogent Econ. Finance. 2025; 13(1). Publisher Full Text
Imran A, et al.: Nexus between green finance, environmental degradation, and sustainable development: Evidence from developing countries. Res. Policy. 2023; 81(January): 103371. Publisher Full Text
IPCC: Climate Change and Land: an IPCC special report on Climate change, desertification, land degradation, sustainable land management, food security and greenhouse gas fluxes in terrestrial ecosystem, Climate Change and Land. Cambridge University Press; 2019. Publisher Full Text
Islam S, Hossain I: The Global Treadmill of Production and the Environment. Social Justice in the Globalization of Production. London: Palgrave Macmillan; 2015; 144–158. Publisher Full Text
Karedla Y, Mishra R, Patel N: The impact of economic growth, trade openness and manufacturing on CO₂ emissions in India: an autoregressive distributive lag (ARDL) bounds test approach. Journal of Economics, Finance and Administrative Science. 2021; 26(52): 376–389. Publisher Full Text
Khan H, Weili L, Khan I: Institutional quality, financial development and the influence of environmental factors on carbon emissions: evidence from a global perspective. Environ. Sci. Pollut. Res. 2022a; 29(9): 13356–13368. PubMed Abstract | Publisher Full Text
Khan H, Weili L, Khan I: The role of financial development and institutional quality in environmental sustainability: panel data evidence from the BRI countries. Environ. Sci. Pollut. Res. 2022b; 29: 83624–83635. Publisher Full Text
Kirikkaleli D, Adebayo TS: Do renewable energy consumption and financial development matter for environmental sustainability? New global evidence. Sustain. Dev. 2021; 29(4): 583–594. Publisher Full Text
Lauer A, Llases L, López-Muñoz P: Toward global environmental scenarios for (and by) the “bottom billion”? Environ. Sci. Policy. 2025; 174: 104268. Publisher Full Text
Leal PH, Marques AC: The evolution of the environmental Kuznets curve hypothesis assessment: A literature review under a critical analysis perspective. Heliyon. 2022; 8(11): e11521. PubMed Abstract | Publisher Full Text | Free Full Text
Lewis TL: Globalizing the treadmill of production: a solutions-oriented application to Ecuador. Environmental Sociology. 2019; 5(3): 219–231. Publisher Full Text
Li D, et al.: Does institutional quality matter for environmental sustainability? Front. Environ. Sci. 2022; 10(July): 1–12. Publisher Full Text
Li W, Wei Y, Chen L, et al.: Multiple environmental inequalities between Global South and Global North in over 10,000 urban centers [Preprint]. Res. Sq. 2025. Publisher Full Text
Naseer MM, Hunjra AI, Palma A, et al.: Sustainable development goals and environmental performance: Exploring the contribution of governance, energy, and growth. Res. Int. Bus. Finance. 2025: 73. Publisher Full Text
Ngarava S: Relationship between economic diversification and CO2 emissions: ARDL-EC modeling in South Africa. Development Studies Research. 2021; 8(1): 264–279. Publisher Full Text
Nkoro E, Uko AK: Autoregressive Distributed Lag (ARDL) cointegration technique: application and interpretation. J. Stat. Econ. Methods. 2016; 5(3): 63–91.
Observatory of the Sahara and Sahel (OSS): African ecosystems: Between degradation and restoration. OSS. 2022. https://oss-online.org/sites/default/files/2022-06/OSS-LivreEcosystemesAfrique_En_0.pdf
Pesaran H, Shin Y, Smith RJ: Bounds testing approaches to the analysis of level relationships. J. Appl. Econ. 2001; 16(3): 289–326. Publisher Full Text
Prempeh KB: The role of economic growth, financial development, globalization, renewable energy and industrialization in reducing environmental degradation in the economic community of West African States. Cogent Economics & Finance. 2024; 12(1): 2308675. Publisher Full Text
Raihan A: Nexus between economic growth, natural resources rents, trade globalization, financial development, and carbon emissions toward environmental sustainability in Uruguay. Electronic Journal of Education, Social Economics and Technology. 2023; 4(2): 55–65. Publisher Full Text
Sadaoui N, et al.: The moderating role of natural resources between governance and CO₂ emissions: Evidence from MENA countries. Energy and Environment. 2024; 35(3): 1597–1615. Publisher Full Text
Sakariyahu R, Fagbemi T, Adigun R, et al.: Severity of environmental degradation and the impact on quality of life in Africa. J. Environ. Manage. 2024; 356: 120537. Publisher Full Text
Sajeev A, Kaur S: Environmental sustainability, trade and economic growth in India: implications for public policy. 2020; 4(2): 141–160. Publisher Full Text
Schnaiberg A, Pellow DN, Weinberg A: The Treadmill of Production and the Environmental State. Social Problems and Public Policy. 2002; 10: 15–32. Publisher Full Text
Shakeel M, Nobre C: Do clean fuel and trade-openness reduce environmental degradation in China: evidence from asymmetric model. Frontiers in Energy Research. 2024; 12: 1–13. Publisher Full Text
Sibanda K, et al.: Natural Resource Rents, Institutional Quality, and Environmental Degradation in Resource-Rich Sub-Saharan African Countries. Sustainability (Switzerland). 2023; 15(2) Publisher Full Text
Sida: Environmental and Climate Change Indicators: Guidance at country and sector level. Stockholm; 2011. https://cdn.sida.se/publications/files/sida61411en-environmental-and-climate-change-indicators.pdf
Song Y, et al.: Does an environmental stringent policy really matter to achieve environmental sustainability in BRICS-T region? Evidence from novel method of moments quantile regression approach. J. Environ. Manag. 2024; 368(July): 121898. PubMed Abstract | Publisher Full Text
Stern DI: Environmental Kuznets curve. In Encyclopedia of Energy. Elsevier; 2004; pp. 517–525. Publisher Full Text
Stern DI: The environmental Kuznets curve: A review. 2014: 1404. Publisher Full Text
Thi D, Pham T, Nguyen HT: Effects of trade openness on environmental quality: evidence from developing countries. J. Appl. Econ. 2024; 27(1). Publisher Full Text
Tran T, et al.: Renewable Energy, Urbanization, Financial Development and Environmental Degradation in the ASEAN Countries. Environ. Urban. ASIA. 2023; 14(1): 10–23. Publisher Full Text
Udemba NE: Mitigating the environmental degradation with institutional quality and foreign direct investment (FDI): new evidence from asymmetric approach. Environ. Sci. Pollut. Res. 2021; 28(32). Publisher Full Text
Usman M, Makhdum MSA, Kousar R: Does financial inclusion, renewable and non-renewable energy utilization accelerate ecological footprints and economic growth? Fresh evidence from 15 highest emitting countries. Sustain. Cities Soc. 2021; 65(November 2020): 102590. Publisher Full Text
Warsame AA, et al.: Renewables and institutional quality mitigate environmental degradation in Somalia. Renew. Energy. 2022; 194: 1184–1191. Publisher Full Text
World Bank Group: Climate Risk Country Profile: Namibia. Washington DC; 2021. https://climateknowledgeportal.worldbank.org/sites/default/files/2021-08/15931-WB_Namibia%20Country%20Profile-WEB.pdf
Xaisongkham S, Liu X: Institutional quality, employment, FDI and environmental degradation in developing countries: evidence from the balanced panel GMM estimator. Int. J. Emerg. Mark. 2024; 19(7): 1920–1939. Publisher Full Text
Zuo S, et al.: The dynamic impact of natural resource rents, financial development, and technological innovations on environmental quality: Empirical evidence from BRI economies. Int. J. Environ. Res. Public Health. 2022; 19(1): 1–17. PubMed Abstract | Publisher Full Text | Free Full Text
Zhang S, Xu G, Shu Y, et al.: Comparing developed and emerging nations’ economic development with environmental footprint for low-carbon competitiveness. Heliyon. 2024; 10(14): e34039. Publisher Full Text

Comments on this article Comments (0)

Version 3

VERSION 3 PUBLISHED 11 Aug 2025

Author details Author details

¹ Business and Economic Science, Nelson Mandela University, Port Elizabeth, Eastern Cape, South Africa

SYDEN MISHI
Roles: Supervision, Writing – Review & Editing

Competing interests

No competing interests were disclosed.

Grant information

The author(s) declared that no grants were involved in supporting this work.

Article Versions (3)

version 3

Revised

Published: 24 Jun 2026, 14:781

https://doi.org/10.12688/f1000research.166902.3

version 2

Revised

Published: 06 Oct 2025, 14:781

https://doi.org/10.12688/f1000research.166902.2

version 1

Published: 11 Aug 2025, 14:781

https://doi.org/10.12688/f1000research.166902.1

© 2026 Fikunawa B and MISHI S. This is an open access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Download

Export To

metrics

	Views	Downloads
F1000Research	-	-
PubMed Central Data from PMC are received and updated monthly.	-	-

Citations

SEE MORE DETAILS

CITE

how to cite this article

Fikunawa B and MISHI S. Financial Sector Development, Institutional Quality and Environmental Degradation in Namibia [version 3; peer review: 2 approved with reservations, 2 not approved]. F1000Research 2026, 14:781 (https://doi.org/10.12688/f1000research.166902.3)

NOTE: If applicable, it is important to ensure the information in square brackets after the title is included in all citations of this article.

track

receive updates on this article

Track an article to receive email alerts on any updates to this article.

Open Peer Review

Current Reviewer Status: ?

Key to Reviewer Statuses VIEW HIDE

ApprovedThe paper is scientifically sound in its current form and only minor, if any, improvements are suggested

Approved with reservations A number of small changes, sometimes more significant revisions are required to address specific details and improve the papers academic merit.

Not approvedFundamental flaws in the paper seriously undermine the findings and conclusions

Version 2

VERSION 2

PUBLISHED 06 Oct 2025

Revised

Views

Reviewer Report 08 Jan 2026

Muntasir Murshed, Daffodil International University, Dhaka, Bangladesh

Approved with Reservations

https://doi.org/10.5256/f1000research.188867.r439318

This research work examines a relevant and timely issue with clear policy implications. With further refinement, it has the potential to make a meaningful contribution. Please consider the following comments to improve your study further:

a. The abstract could be improved by clearly and concisely presenting the research objectives, data, and methodology, key findings, and principal policy implications.

b. Strengthening the introduction with a more comprehensive background and theoretical context would help readers better understand the motivation and relevance of the study.

c. Clearly identifying the gaps in the existing literature and explicitly stating the study’s contributions would significantly improve the positioning of the research.

d. Including a brief overview of the main findings at the end of the introduction would enhance coherence and guide the reader through the paper.

e. The literature review would benefit from broader coverage, particularly by incorporating recent and relevant studies published within the last two to three years.

f. Providing stronger justification for the chosen methodology, including a discussion of its suitability and advantages, would improve the credibility of the empirical analysis.

g. The findings could be more deeply embedded within relevant theoretical frameworks and discussed in relation to prior empirical studies, highlighting both consistencies and deviations.

h. The conclusion could be made more concise while clearly emphasizing the key contributions and implications of the study.

i. Policy recommendations could be sharpened by making them more specific, actionable, and directly derived from the empirical findings, rather than remaining generic.

j. Expanding the discussion on future research directions would help identify promising avenues for extending and deepening the current analysis.

Is the work clearly and accurately presented and does it cite the current literature?

Partly
Is the study design appropriate and is the work technically sound?

Yes
Are sufficient details of methods and analysis provided to allow replication by others?

Yes
If applicable, is the statistical analysis and its interpretation appropriate?

Yes
Are all the source data underlying the results available to ensure full reproducibility?

Yes
Are the conclusions drawn adequately supported by the results?

Yes

Competing Interests: No competing interests were disclosed.

Reviewer Expertise: Environmental Economics

I confirm that I have read this submission and believe that I have an appropriate level of expertise to confirm that it is of an acceptable scientific standard, however I have significant reservations, as outlined above.

CITE

Report a concern

Author Response 09 Jun 2026

Brigitte FIkunawa, Business and Economic Science, Nelson Mandela University, Port Elizabeth, South Africa

09 Jun 2026

Author Response

a. The abstract could be improved by clearly and concisely presenting the research objectives, data, and methodology, key findings, and principal policy implications.
The abstract has been amplified to clearly ... Continue reading a. The abstract could be improved by clearly and concisely presenting the research objectives, data, and methodology, key findings, and principal policy implications.
The abstract has been amplified to clearly enhance the quality of the abstract as suggested in the comment.
b. Strengthening the introduction with a more comprehensive background and theoretical context would help readers better understand the motivation and relevance of the study.
The introduction has been improved, enhancing the background and also including theoretical context such as the theory of institutions.
c. Clearly identifying the gaps in the existing literature and explicitly stating the study’s contributions would significantly improve the positioning of the research.
The gap has been identify and contribution of the study has been included in the 2nd last paragraph of the introduction.
d. Including a brief overview of the main findings at the end of the introduction would enhance coherence and guide the reader through the paper.
The main findings have been included in the 2nd last paragraph, including the methodology used and the findings
e. The literature review would benefit from broader coverage, particularly by incorporating recent and relevant studies published within the last two to three years.
The empirical literature reviewed has been expanded and includes some recent studies from 2025 and 2024.
f. Providing stronger justification for the chosen methodology, including a discussion of its suitability and advantages, would improve the credibility of the empirical analysis.
The suitability of ARDL is noted: "the ARDL approach remains appropriate for this study because it is widely recognized for its suitability in small sample time series analysis and for variables integrated at different orders, provided none are integrated beyond I(1)".
g. The findings could be more deeply embedded within relevant theoretical frameworks and discussed in relation to prior empirical studies, highlighting both consistencies and deviations.
The findings have been amplified and also included referencing theoretical frameworks; results inconsistent with previous studies have been acknowledged and explained.
h. The conclusion could be made more concise while clearly emphasizing the key contributions and implications of the study.
The conclusion, implications and contribution have been enhanced further.
i. Policy recommendations could be sharpened by making them more specific, actionable, and directly derived from the empirical findings, rather than remaining generic.
Policy recommendations have been improved and made more action-oriented and specific.
j. Expanding the discussion on future research directions would help identify promising avenues for extending and deepening the current analysis
Discussion for future studies has been expanded further.
a. The abstract could be improved by clearly and concisely presenting the research objectives, data, and methodology, key findings, and principal policy implications.
The abstract has been amplified to clearly enhance the quality of the abstract as suggested in the comment.
b. Strengthening the introduction with a more comprehensive background and theoretical context would help readers better understand the motivation and relevance of the study.
The introduction has been improved, enhancing the background and also including theoretical context such as the theory of institutions.
c. Clearly identifying the gaps in the existing literature and explicitly stating the study’s contributions would significantly improve the positioning of the research.
The gap has been identify and contribution of the study has been included in the 2nd last paragraph of the introduction.
d. Including a brief overview of the main findings at the end of the introduction would enhance coherence and guide the reader through the paper.
The main findings have been included in the 2nd last paragraph, including the methodology used and the findings
e. The literature review would benefit from broader coverage, particularly by incorporating recent and relevant studies published within the last two to three years.
The empirical literature reviewed has been expanded and includes some recent studies from 2025 and 2024.
f. Providing stronger justification for the chosen methodology, including a discussion of its suitability and advantages, would improve the credibility of the empirical analysis.
The suitability of ARDL is noted: "the ARDL approach remains appropriate for this study because it is widely recognized for its suitability in small sample time series analysis and for variables integrated at different orders, provided none are integrated beyond I(1)".
g. The findings could be more deeply embedded within relevant theoretical frameworks and discussed in relation to prior empirical studies, highlighting both consistencies and deviations.
The findings have been amplified and also included referencing theoretical frameworks; results inconsistent with previous studies have been acknowledged and explained.
h. The conclusion could be made more concise while clearly emphasizing the key contributions and implications of the study.
The conclusion, implications and contribution have been enhanced further.
i. Policy recommendations could be sharpened by making them more specific, actionable, and directly derived from the empirical findings, rather than remaining generic.
Policy recommendations have been improved and made more action-oriented and specific.
j. Expanding the discussion on future research directions would help identify promising avenues for extending and deepening the current analysis
Discussion for future studies has been expanded further.
Competing Interests: No competing interests Close
Report a concern
Respond or Comment

COMMENTS ON THIS REPORT

Author Response 09 Jun 2026

Brigitte FIkunawa, Business and Economic Science, Nelson Mandela University, Port Elizabeth, South Africa

09 Jun 2026

Author Response

a. The abstract could be improved by clearly and concisely presenting the research objectives, data, and methodology, key findings, and principal policy implications.
The abstract has been amplified to clearly ... Continue reading a. The abstract could be improved by clearly and concisely presenting the research objectives, data, and methodology, key findings, and principal policy implications.
The abstract has been amplified to clearly enhance the quality of the abstract as suggested in the comment.
b. Strengthening the introduction with a more comprehensive background and theoretical context would help readers better understand the motivation and relevance of the study.
The introduction has been improved, enhancing the background and also including theoretical context such as the theory of institutions.
c. Clearly identifying the gaps in the existing literature and explicitly stating the study’s contributions would significantly improve the positioning of the research.
The gap has been identify and contribution of the study has been included in the 2nd last paragraph of the introduction.
d. Including a brief overview of the main findings at the end of the introduction would enhance coherence and guide the reader through the paper.
The main findings have been included in the 2nd last paragraph, including the methodology used and the findings
e. The literature review would benefit from broader coverage, particularly by incorporating recent and relevant studies published within the last two to three years.
The empirical literature reviewed has been expanded and includes some recent studies from 2025 and 2024.
f. Providing stronger justification for the chosen methodology, including a discussion of its suitability and advantages, would improve the credibility of the empirical analysis.
The suitability of ARDL is noted: "the ARDL approach remains appropriate for this study because it is widely recognized for its suitability in small sample time series analysis and for variables integrated at different orders, provided none are integrated beyond I(1)".
g. The findings could be more deeply embedded within relevant theoretical frameworks and discussed in relation to prior empirical studies, highlighting both consistencies and deviations.
The findings have been amplified and also included referencing theoretical frameworks; results inconsistent with previous studies have been acknowledged and explained.
h. The conclusion could be made more concise while clearly emphasizing the key contributions and implications of the study.
The conclusion, implications and contribution have been enhanced further.
i. Policy recommendations could be sharpened by making them more specific, actionable, and directly derived from the empirical findings, rather than remaining generic.
Policy recommendations have been improved and made more action-oriented and specific.
j. Expanding the discussion on future research directions would help identify promising avenues for extending and deepening the current analysis
Discussion for future studies has been expanded further.
a. The abstract could be improved by clearly and concisely presenting the research objectives, data, and methodology, key findings, and principal policy implications.
The abstract has been amplified to clearly enhance the quality of the abstract as suggested in the comment.
b. Strengthening the introduction with a more comprehensive background and theoretical context would help readers better understand the motivation and relevance of the study.
The introduction has been improved, enhancing the background and also including theoretical context such as the theory of institutions.
c. Clearly identifying the gaps in the existing literature and explicitly stating the study’s contributions would significantly improve the positioning of the research.
The gap has been identify and contribution of the study has been included in the 2nd last paragraph of the introduction.
d. Including a brief overview of the main findings at the end of the introduction would enhance coherence and guide the reader through the paper.
The main findings have been included in the 2nd last paragraph, including the methodology used and the findings
e. The literature review would benefit from broader coverage, particularly by incorporating recent and relevant studies published within the last two to three years.
The empirical literature reviewed has been expanded and includes some recent studies from 2025 and 2024.
f. Providing stronger justification for the chosen methodology, including a discussion of its suitability and advantages, would improve the credibility of the empirical analysis.
The suitability of ARDL is noted: "the ARDL approach remains appropriate for this study because it is widely recognized for its suitability in small sample time series analysis and for variables integrated at different orders, provided none are integrated beyond I(1)".
g. The findings could be more deeply embedded within relevant theoretical frameworks and discussed in relation to prior empirical studies, highlighting both consistencies and deviations.
The findings have been amplified and also included referencing theoretical frameworks; results inconsistent with previous studies have been acknowledged and explained.
h. The conclusion could be made more concise while clearly emphasizing the key contributions and implications of the study.
The conclusion, implications and contribution have been enhanced further.
i. Policy recommendations could be sharpened by making them more specific, actionable, and directly derived from the empirical findings, rather than remaining generic.
Policy recommendations have been improved and made more action-oriented and specific.
j. Expanding the discussion on future research directions would help identify promising avenues for extending and deepening the current analysis
Discussion for future studies has been expanded further.
Competing Interests: No competing interests Close
Report a concern

Views

Reviewer Report 07 Jan 2026

Rui Alexandre Castanho, Instituto Politécnico de Portalegre (IPP), Portalegre, Portugal

Not Approved

https://doi.org/10.5256/f1000research.188867.r446880

The article examines the relationship between financial sector development, institutional quality, and environmental degradation in Namibia, using annual time-series data from 1990 to 2023 and an ARDL modelling framework. Environmental degradation is measured by CO₂ emissions per capita, financial development by credit to the private sector, and institutional quality by a governance index. In fact, the topic is timely and relevant, and the focus on a climate-vulnerable, resource-dependent country adds value. The econometric approach is suitable, and the authors promote transparency by sharing their data. Still, clarity is reduced by inconsistent terminology, unresolved confusion about variable definitions (notably GDP versus log GDP), limited explanation of key indicators, and insufficient methodological detail for full replicability.
More importantly, the interpretation of the results and the resulting conclusions raise significant concerns. The positive relationship identified between institutional quality and environmental degradation is not clearly explained and contradicts both the paper’s theoretical framework and its policy recommendations, which support strengthening institutions. This inconsistency, along with the absence of robustness checks, small-sample limitations, and weak alignment between empirical findings and policy implications, undermines the study’s scientific validity. Substantial revisions are needed to clarify variable construction, improve methodological transparency, address the institutional quality result, and ensure that conclusions and recommendations are fully supported by the evidence.

Is the work clearly and accurately presented and does it cite the current literature?

Partly
Is the study design appropriate and is the work technically sound?

Partly
Are sufficient details of methods and analysis provided to allow replication by others?

Partly
If applicable, is the statistical analysis and its interpretation appropriate?

Partly
Are all the source data underlying the results available to ensure full reproducibility?

Partly
Are the conclusions drawn adequately supported by the results?

No

Competing Interests: No competing interests were disclosed.

Reviewer Expertise: Sustainable development economics; environmental and climate policy; financial development and green finance; institutional quality and governance.

I confirm that I have read this submission and believe that I have an appropriate level of expertise to state that I do not consider it to be of an acceptable scientific standard, for reasons outlined above.

CITE

Report a concern

Author Response 09 Jun 2026

Brigitte FIkunawa, Business and Economic Science, Nelson Mandela University, Port Elizabeth, South Africa

09 Jun 2026

Author Response
Clarity is reduced by inconsistent terminology, unresolved confusion about variable definitions (notably GDP versus log GDP), limited explanation of key indicators, and insufficient methodological detail for full replicability.
... Continue reading
Clarity is reduced by inconsistent terminology, unresolved confusion about variable definitions (notably GDP versus log GDP), limited explanation of key indicators, and insufficient methodological detail for full replicability.

GDP has been used consistently and after the log transformation, all variables, including GDP, are defined as lnGDP

The key indicators have been explained in terms of proxy data sources; additionally, the methodology approach has been explained and justification for suitability has been included in the revised version.

More importantly, the interpretation of the results and the resulting conclusions raise significant concerns. The positive relationship identified between institutional quality and environmental degradation is not clearly explained and contradicts both the paper’s theoretical framework and its policy recommendations, which support strengthening institutions.

The positive relationship between institutional quality and environmental degradation has been revised to explain that institutional quality increased environmental degradation. Additionally, it has been explained based on the theories and previous studies that found similar findings that good quality institutions tend to encourage economic activities, which further exacerbates degradation.

This inconsistency, along with the absence of robustness checks, small-sample limitations, and weak alignment between empirical findings and policy implications, undermines the study’s scientific validity. Substantial revisions are needed to clarify variable construction, improve methodological transparency, address the institutional quality result, and ensure that conclusions and recommendations are fully supported by the evidence.

robustness check has been included;

small sample limitation has been acknowledged, and methodological approach suitability has been explained and justified.

the findings and policy implications have been aligned correctly to enhance outcomes
Clarity is reduced by inconsistent terminology, unresolved confusion about variable definitions (notably GDP versus log GDP), limited explanation of key indicators, and insufficient methodological detail for full replicability.

GDP has been used consistently and after the log transformation, all variables, including GDP, are defined as lnGDP

The key indicators have been explained in terms of proxy data sources; additionally, the methodology approach has been explained and justification for suitability has been included in the revised version.

More importantly, the interpretation of the results and the resulting conclusions raise significant concerns. The positive relationship identified between institutional quality and environmental degradation is not clearly explained and contradicts both the paper’s theoretical framework and its policy recommendations, which support strengthening institutions.

The positive relationship between institutional quality and environmental degradation has been revised to explain that institutional quality increased environmental degradation. Additionally, it has been explained based on the theories and previous studies that found similar findings that good quality institutions tend to encourage economic activities, which further exacerbates degradation.

This inconsistency, along with the absence of robustness checks, small-sample limitations, and weak alignment between empirical findings and policy implications, undermines the study’s scientific validity. Substantial revisions are needed to clarify variable construction, improve methodological transparency, address the institutional quality result, and ensure that conclusions and recommendations are fully supported by the evidence.

robustness check has been included;

small sample limitation has been acknowledged, and methodological approach suitability has been explained and justified.

the findings and policy implications have been aligned correctly to enhance outcomes
Competing Interests: no competing interests Close
Report a concern
Respond or Comment

COMMENTS ON THIS REPORT

Author Response 09 Jun 2026

Brigitte FIkunawa, Business and Economic Science, Nelson Mandela University, Port Elizabeth, South Africa

09 Jun 2026

Author Response
Clarity is reduced by inconsistent terminology, unresolved confusion about variable definitions (notably GDP versus log GDP), limited explanation of key indicators, and insufficient methodological detail for full replicability.
... Continue reading
Clarity is reduced by inconsistent terminology, unresolved confusion about variable definitions (notably GDP versus log GDP), limited explanation of key indicators, and insufficient methodological detail for full replicability.

GDP has been used consistently and after the log transformation, all variables, including GDP, are defined as lnGDP

The key indicators have been explained in terms of proxy data sources; additionally, the methodology approach has been explained and justification for suitability has been included in the revised version.

More importantly, the interpretation of the results and the resulting conclusions raise significant concerns. The positive relationship identified between institutional quality and environmental degradation is not clearly explained and contradicts both the paper’s theoretical framework and its policy recommendations, which support strengthening institutions.

The positive relationship between institutional quality and environmental degradation has been revised to explain that institutional quality increased environmental degradation. Additionally, it has been explained based on the theories and previous studies that found similar findings that good quality institutions tend to encourage economic activities, which further exacerbates degradation.

This inconsistency, along with the absence of robustness checks, small-sample limitations, and weak alignment between empirical findings and policy implications, undermines the study’s scientific validity. Substantial revisions are needed to clarify variable construction, improve methodological transparency, address the institutional quality result, and ensure that conclusions and recommendations are fully supported by the evidence.

robustness check has been included;

small sample limitation has been acknowledged, and methodological approach suitability has been explained and justified.

the findings and policy implications have been aligned correctly to enhance outcomes
Clarity is reduced by inconsistent terminology, unresolved confusion about variable definitions (notably GDP versus log GDP), limited explanation of key indicators, and insufficient methodological detail for full replicability.

GDP has been used consistently and after the log transformation, all variables, including GDP, are defined as lnGDP

The key indicators have been explained in terms of proxy data sources; additionally, the methodology approach has been explained and justification for suitability has been included in the revised version.

More importantly, the interpretation of the results and the resulting conclusions raise significant concerns. The positive relationship identified between institutional quality and environmental degradation is not clearly explained and contradicts both the paper’s theoretical framework and its policy recommendations, which support strengthening institutions.

The positive relationship between institutional quality and environmental degradation has been revised to explain that institutional quality increased environmental degradation. Additionally, it has been explained based on the theories and previous studies that found similar findings that good quality institutions tend to encourage economic activities, which further exacerbates degradation.

This inconsistency, along with the absence of robustness checks, small-sample limitations, and weak alignment between empirical findings and policy implications, undermines the study’s scientific validity. Substantial revisions are needed to clarify variable construction, improve methodological transparency, address the institutional quality result, and ensure that conclusions and recommendations are fully supported by the evidence.

robustness check has been included;

small sample limitation has been acknowledged, and methodological approach suitability has been explained and justified.

the findings and policy implications have been aligned correctly to enhance outcomes
Competing Interests: no competing interests Close
Report a concern

Views

Reviewer Report 28 Oct 2025

Kwadwo Boateng Prempeh, Accounting and Business Analyt, Sunyani Technical University, Sunyani, Brong Ahafo Region, Ghana

Not Approved

https://doi.org/10.5256/f1000research.188867.r421241

Financial Sector Development, Institutional Quality and Environmental
This study examines the relationship between financial sector development, institutional quality, and environmental degradation in Namibia using the ARDL methodology with time series data from 1990 to 2023. While the topic is timely and relevant, particularly for understanding climate change dynamics in sub-Saharan Africa, several methodological and presentational issues require attention before publication.
1.   The abstract contains an incomplete sentence in the conclusion section. The final sentence states that Namibia should strengthen the role of institutions and support financial innovation, but ends with "address environmental degradation. Additionally, encouragement of environmental, societal, and governance (ESG) led business investments is needed, without completing the thought about what role institutions should play. The abstract also uses terminology inconsistently, shifting between environmental degradation, environmental quality, and environmental sustainability as though these are interchangeable when they actually represent different concepts.

2.   The introduction paragraph structure is quite dense, with the opening paragraph covering global environmental challenges, the African context, Namibian specifics, economic activities, and policy responses all in one extended discussion. Breaking this into two or three focused paragraphs would improve readability. The flow from global context to African context to Namibian context could also be smoother, with clearer transitions between levels of analysis. Throughout the introduction, claims such as "various laws have been implemented" would be strengthened by quantification, specifying how many laws, when they were implemented, and what they aimed to achieve.

3.   The paper presents two theories (the Treadmill of Production and Environmental Kuznets Curve) but lacks explicit hypothesis formulation derived from these frameworks. The connection between theory and empirical testing remains unclear. The authors should develop specific, testable hypotheses based on the theoretical discussion rather than simply reviewing theories and proceeding to empirical analysis. Additionally, the paper needs to clarify which theory it primarily tests or whether it attempts to reconcile both perspectives. The introduction establishes that Namibia faces unique environmental challenges as a hyper-arid country heavily dependent on natural resource extraction. However, the theoretical section does not adequately explain why Namibia represents an appropriate context for testing these theories or how the Namibian case might offer unique insights into the finance-institutions-environment nexus.

4.   The study uses CO₂ per capita as the sole environmental degradation measure, justified by data constraints. However, given that Namibia's primary environmental challenge is land degradation and desertification rather than carbon emissions, as the introduction itself emphasises, this proxy may not capture the most relevant environmental impacts. The paper acknowledges this limitation briefly but should discuss it more extensively, perhaps exploring whether findings might differ with more contextually appropriate measures. The measurement of institutional quality also lacks sufficient detail. The paper does not specify which index or composite measure was used, how it was constructed, or what dimensions of governance it captures. This information is critical for replicability and for understanding what the results actually mean.

5.   The literature review, while comprehensive in citing relevant studies, lacks a clear organisational structure. Studies are presented somewhat chronologically or geographically without clear thematic organisation. The review would benefit from restructuring around key themes such as institutional quality effects, financial development effects, interactive effects, and methodological approaches. Within each theme, the review should move from general findings to context-specific findings, ultimately identifying the gap that the current study addresses.

6.   The review also needs more critical synthesis. Rather than simply reporting that some studies find X while others find Y, the paper should analyse why findings differ across contexts, what methodological choices drive different conclusions, and what theoretical mechanisms might explain divergent results. This critical engagement would better position the current study within the literature and clarify its unique contribution.

7.   The review places insufficient emphasis on the African context. While several African studies are cited, the review does not adequately discuss how findings from developed economies or Asian emerging markets might or might not transfer to the sub-Saharan African context. Given the paper's focus on Namibia, more attention to studies from similar semi-arid, resource-dependent economies would strengthen the contextual grounding. Also, consider including this relevant literature to improve the section: https://doi.org/10.1186/s43093-023-00286-1, https://doi.org/10.1080/23322039.2024.2308675

8.   The confusion between GDP growth and logGDP persists throughout the paper. The text refers to GDP growth, suggesting a rate of change, while Table 1 shows logGDP, which represents the logarithm of GDP levels. These are fundamentally different variables with different interpretations. If the analysis uses GDP growth rates, the tables should reflect this; if it uses log levels, the text should be consistent. This inconsistency undermines confidence in the reported results.

9.   With only 31-34 observations depending on the variable, the study faces potential statistical power issues, particularly given the number of parameters estimated in the ARDL model. Time series analysis with small samples can produce unstable estimates, and this limitation deserves explicit discussion in a limitations section. The paper should address whether the sample size is adequate for the chosen methodology and whether a few influential observations might drive results.

10.   The ARDL equation contains several specification problems. The subscript notation switches inconsistently between i and t, creating confusion about whether this is panel or time series analysis. There is an unexplained aqt term that appears without definition. Most importantly, natural resource rent appears prominently in the literature review and abstract but does not appear in the empirical model. Either NRR should be included as a variable or its exclusion should be explicitly justified. Given that Namibia's economy depends heavily on natural resource extraction, omitting this variable seems problematic and may bias other coefficients. The paper also does not discuss how optimal lag lengths were selected for the ARDL model or present information criteria used to determine the lag structure, which is standard practice in ARDL applications.

11.   The most problematic issue in the paper is the positive relationship between institutional quality and environmental degradation. While the authors acknowledge this finding contradicts expectations and cite some supporting literature, the explanation remains theoretically unsatisfying and internally inconsistent. The finding contradicts a substantial body of literature cited in the same paper, including several studies that find institutional quality reduces environmental degradation. More fundamentally, the interpretation that weak institutions cause degradation creates a logical problem. If institutional quality is measured on a scale where higher values indicate better institutions, then the positive coefficient suggests that better institutions increase degradation, not that weak institutions do. Conversely, if weak institutions are responsible, the coefficient should be negative.

12.   The counterintuitive institutional quality finding requires fundamental reconceptualisation rather than simple acknowledgement. The authors should consider several approaches. First, they could test for non-linear effects by including a squared term for institutional quality to see whether the relationship changes direction at different quality levels. Second, they could examine whether alternative measures of institutional quality (regulatory quality, rule of law, government effectiveness, etc.) produce different results, which would indicate measurement sensitivity. Third, they could conduct qualitative institutional analysis to understand what aspects of Namibian governance might produce this unexpected pattern. Fourth, they could explicitly model potential reverse causality using instrumental variables or other techniques. Without addressing this central finding more thoroughly, the paper's contribution remains questionable.

13.   This apparent contradiction suggests several possibilities that deserve exploration. First, there may be measurement issues with the institutional quality variable, particularly if it does not adequately capture environmental governance capacity. Second, there may be reverse causality, where environmental crises prompt institutional responses, creating a positive correlation. Third, there may be a non-linear relationship not captured by the linear specification, where institutional quality has different effects at different levels of development. Fourth, the result might reflect Namibia's specific institutional context, where governance structures prioritise economic development from resource extraction over environmental protection. The paper needs to investigate these possibilities more thoroughly rather than simply accepting the findings at face value.

14.   The policy recommendations do not logically follow from the findings, creating further confusion. If institutional quality increases degradation, as the results indicate, why should the policy recommendation be to strengthen institutions? The disconnect between findings and recommendations needs resolution. Either the authors should reinterpret their findings, demonstrate why the counterintuitive result is actually correct, or acknowledge fundamental uncertainty about the institutional quality effect.

15.   The diagnostic test results in Table 6 appear quite late in the results section, after the main coefficients have been presented and interpreted. Standard practice places diagnostic tests immediately after or alongside the main results to establish the validity of the estimates before interpretation proceeds. The tables themselves could be more informative. Table 1 presents basic descriptive statistics, but could add skewness and kurtosis better to assess distributional properties relevant for time series analysis. Tables 4 and 5 present coefficient estimates but omit overall model fit statistics such as R-squared or adjusted R-squared, making it difficult to assess how well the model explains variation in environmental degradation.

16.   The stationarity testing section presents results from three different unit root tests (Augmented Dickey-Fuller, Dickey-Fuller, and Phillips-Perron) but does not explain why three tests were necessary or how any conflicts between test results were resolved. In cases where different tests give different answers about integration order, researchers must justify which result they rely on. The paper presents all three sets of results without synthesis.

17.   The cointegration analysis confirms that long-run relationships exist between the variables through the bounds testing procedure, but the paper does not discuss the economic interpretation of this cointegration. What does it mean economically that these variables move together in the long run? Does this suggest common driving forces, causal relationships, or simply correlated trends? The existence of cointegration has policy implications that deserve discussion.

18.   The error correction term of -0.926 indicates rapid adjustment to equilibrium, with full adjustment occurring in approximately 1.08 years. The paper mentions this speed but does not interpret what it implies for policy. A rapid adjustment speed suggests that shocks to environmental quality are quickly corrected, which might mean that policy interventions need to be sustained rather than one-time efforts. Alternatively, it might suggest that environmental degradation responds relatively quickly to changes in financial development or institutional quality, making these effective policy levers. This interpretation is missing.

19.   While the paper mentions data sources generally, full replicability requires more detailed documentation. A table listing each variable with its exact source, frequency, original units, and any transformations applied would be valuable. For example, if GDP was log-transformed, at what stage was this transformation applied? Were any variables deflated or adjusted for inflation? How were any currency conversions handled?

20.   The paper notes that renewable energy data covers only 31 observations while other variables have 34 observations, creating a data gap. How was this gap handled? Was the analysis conducted on the common time period of 31 observations, or were missing values imputed, or does the ARDL procedure handle unbalanced data in some way? These details matter for interpreting the results and for any replication attempts.

21.   The data availability statement mentions an extended data file but provides a Mendeley link that may not be permanently accessible. Best practice for published articles is to deposit data in a stable repository with a persistent identifier and to provide complete documentation of all data sources, transformations, and coding decisions.

22.   The Namibian context needs substantial strengthening throughout the paper. While the introduction mentions Namibia's arid climate and resource dependence, subsequent sections lose sight of this context. The empirical section should include more discussion of specific Namibian policies, institutional structures, and financial sector characteristics that might explain the results. For example, how does Namibia's financial sector compare to regional peers? What specific environmental regulations exist, and how effectively are they enforced? What is the composition of the institutional quality index in the Namibian case? Grounding the analysis more firmly in Namibian reality would help readers understand whether findings are generalisable or context-specific.

23.   Robustness checks are essential for establishing confidence in the results. The paper should explore alternative model specifications, including squared terms for Environmental Kuznets Curve testing, interaction terms between financial development and institutional quality to test whether their effects are complementary or substitutable, and different lag structures in the ARDL specification. If alternative measures of environmental degradation are available even for shorter time periods, sensitivity analysis using these alternatives would be valuable. Sub-period analysis could check whether relationships have been stable over time or whether structural breaks exist. These robustness checks need not all appear in the main text but could be relegated to appendices with key findings summarised in the discussion.

24.   The conclusion section feels rushed and underdeveloped relative to the complexity of the findings. Policy recommendations should be more specific and actionable, moving beyond general statements about strengthening institutions and supporting green finance. What specific institutional reforms would be most effective? What types of financial instruments or incentive structures would best channel capital toward environmental sustainability in Namibia's context? How can the apparent tension between institutional development and environmental outcomes be navigated in policy design? What implementation challenges might arise, and how could they be addressed? A more robust conclusion would also discuss limitations more explicitly and outline a clear agenda for future research.

25.   The response to the previous reviewer's comments, while indicating that changes were made, does not appear to have fully resolved the issues raised. The GDP versus logGDP confusion persists, suggesting incomplete revision. A more thorough response to reviewer concerns is needed, ensuring that each point is not just acknowledged but actually addressed in the revised manuscript.

26.   Throughout the manuscript, several specific corrections are needed. On page 3, the statement that "Propelling growth through the extractive primary sector strains the environment" requires citation, as this is an empirical claim rather than self-evident fact. On page 6, the notation "β1 β13 are short- and long-run parameters" should specify which parameters correspond to short-run effects and which to long-run effects. On page 7, there appears to be an inconsistency in significance level reporting, where institutional quality shows a p-value of 0.0875 in the table, but the text describes it as significant, which, at conventional levels, it is not. The references section should be checked to ensure that all citations in the text appear in the reference list and vice versa, and that all reference formatting is consistent.

Is the work clearly and accurately presented and does it cite the current literature?

Partly
Is the study design appropriate and is the work technically sound?

Partly
Are sufficient details of methods and analysis provided to allow replication by others?

Partly
If applicable, is the statistical analysis and its interpretation appropriate?

Partly
Are all the source data underlying the results available to ensure full reproducibility?

Partly
Are the conclusions drawn adequately supported by the results?

No

Competing Interests: No competing interests were disclosed.

Reviewer Expertise: Sustainable Development, Financial Development, Renewable energy, corporate finance

CITE

Report a concern

Respond or Comment

Version 1

VERSION 1

PUBLISHED 11 Aug 2025

Views

Reviewer Report 23 Sep 2025

Tafirenyika Sunde, North-West University, Potchefstroom, South Africa

Approved with Reservations

https://doi.org/10.5256/f1000research.183957.r411614

Comments and Suggestions

· Abstract coherence and completeness

Fix grammar and logic: “compounded by an arid and low-income country” → “as an arid, lower-middle-income country.”
Align claims with results: abstract says

Comments and Suggestions

· Abstract coherence and completeness

Fix grammar and logic: “compounded by an arid and low-income country” → “as an arid, lower-middle-income country.”
Align claims with results: abstract says institutional quality reduces degradation, but results show a positive link.
Finish the broken concluding sentence and the ESG line so they read as complete sentences.

· Variable and model consistency

Define the full regressor set once and use it consistently. You introduce CO₂, IQ, FSD, TO, REC, GDP, but the ARDL equation also includes FDI and an unexplained aqt term. Either drop FDI everywhere or add it to the data, tables, and narrative.
Use the same GDP measure throughout: Table 1 uses logGDP, text says “GDP growth.”
Fix typos in symbols: TO is written as T0 in the ARDL, and FDIt appears without prior definition.

· Statistical claims and tests

Remove the incorrect claim that “low standard deviations indicate normality.” Descriptives do not test normality.

Clean the unit-root table: replace comma decimals (e.g., −3,462) with points, standardise significance stars, and ensure each series’ integration order is stated once.

In the bounds section, fix “if?” and clarify the decision rule text.

· Tables, diagnostics, and terminology

Correct test names: “Brush Pagan” → Breusch-Pagan; “Jarqa Bera” → Jarque-Bera.

Ensure Table 4–5 coefficients are interpreted consistently with the narrative; reconcile the IQ sign with the write-up.

State exactly what the ECT value implies and avoid mixing “within a year” with “1.079 years” without showing the conversion.

· Editing and formatting fixes

“Question 5 presents the conclusions” → “Section 5 presents…”.

Fix spacing and typos: “Chamber ofMines,” “mode is supported,” “reduction degradation,” space in “$ 640 million.”

Ensure section numbering, references, and data links are consistent; avoid linking to Mendeley draft URLs in an indexed manuscript.

Is the work clearly and accurately presented and does it cite the current literature?

Yes
Is the study design appropriate and is the work technically sound?

Yes
Are sufficient details of methods and analysis provided to allow replication by others?

Yes
If applicable, is the statistical analysis and its interpretation appropriate?

Yes
Are all the source data underlying the results available to ensure full reproducibility?

No source data required
Are the conclusions drawn adequately supported by the results?

Yes

Competing Interests: No competing interests were disclosed.

Reviewer Expertise: Economics, Econometrics, environmental studies and public policy.

CITE

Report a concern

Author Response 30 Sep 2025

Brigitte FIkunawa, Business and Economic Science, Nelson Mandela University, Port Elizabeth, South Africa

30 Sep 2025

Author Response

1. The proposed changes in the abstract have been attended to and rectified.
2. All typos have been rectified
3. The variable logGDP had been renamed to GDP to represent ... Continue reading 1. The proposed changes in the abstract have been attended to and rectified.
2. All typos have been rectified
3. The variable logGDP had been renamed to GDP to represent GDP growth,
4. FDI was a typo and redundant. It has been removed from the ARDL equation.
5. The ECM has been rectified and addressed
6. Institutional quality explanation and sign have been aligned.
7. The link for extended data has been rectified with the correct link.
1. The proposed changes in the abstract have been attended to and rectified.
2. All typos have been rectified
3. The variable logGDP had been renamed to GDP to represent GDP growth,
4. FDI was a typo and redundant. It has been removed from the ARDL equation.
5. The ECM has been rectified and addressed
6. Institutional quality explanation and sign have been aligned.
7. The link for extended data has been rectified with the correct link.
Competing Interests: No competing interests Close
Report a concern
Author Response 09 Jun 2026

Brigitte FIkunawa, Business and Economic Science, Nelson Mandela University, Port Elizabeth, South Africa

09 Jun 2026

Author Response
Abstract coherence and completeness
- Fix grammar and logic: “compounded by an arid and low-income country” → “as an arid, lower-middle-income country.” This has been rectified.
- Align claims with
... Continue reading
Abstract coherence and completeness

Fix grammar and logic: “compounded by an arid and low-income country” → “as an arid, lower-middle-income country.” This has been rectified.

Align claims with results: the abstract says institutional quality reduces degradation, but results show a positive link. An adjustment was made that "institutional quality increases environmental degradation".

Finish the broken concluding sentence and the ESG line so they read as complete sentences. The sentence has been made complete as follows:" Additionally, the study encourages environmental, social, and governance (ESG)-led business investments through enhanced sustainability reporting requirements for listed firms, as these measures support the principles of sustainable development and the triple bottom line rather than prioritising profit maximisation alone".

· Variable and model consistency

Define the full regressor set once and use it consistently. You introduce CO₂, IQ, FSD, TO, REC, GDP, but the ARDL equation also includes FDI and an unexplained aqt term. Either drop FDI everywhere or add it to the data, tables, and narrative. "FDI has been dropped in the whole article".

Use the same GDP measure throughout: Table 1 uses logGDP, text says “GDP growth.” Used the term GDP and lnGDP as all variables have been transformed for uniformity and easy measurement.

Fix typos in symbols: TO is written as T0 in the ARDL, and FDIt appears without prior definition. T0 has been rectified to "TO" and also FDI has been removed.

· Statistical claims and tests

Remove the incorrect claim that “low standard deviations indicate normality.” Descriptives do not test normality. This has been removed as suggested.

Clean the unit-root table: replace comma decimals (e.g., −3,462) with points, standardise significance stars, and ensure each series’ integration order is stated once. The comma has been removed and the correct one has been used.

In the bounds section, fix “if?” and clarify the decision rule text. The " if " has been removed and an explanation has been used to clarify the decision.

· Tables, diagnostics, and terminology

Correct test names: “Brush Pagan” → Breusch-Pagan; “Jarqa Bera” → Jarque-Bera. (This has been corrected)

Ensure Table 4–5 coefficients are interpreted consistently with the narrative; reconcile the IQ sign with the write-up. (The IQ sign and narrative have been reconciled to show that increased institutional quality increases environmental degradation)

State exactly what the ECT value implies and avoid mixing “within a year” with “1.079 years” without showing the conversion. (This has been rectified)

· Editing and formatting fixes

“Question 5 presents the conclusions” → “Section 5 presents…”. This has been rectified

Fix spacing and typos: “Chamber ofMines,” “mode is supported,” “reduction degradation,” space in “$ 640 million.” (The typo has been rectified)

Ensure section numbering, references, and data links are consistent; avoid linking to Mendeley draft URLs in an indexed manuscript. The draft link has been removed and replaced with the published and correct link for data. Additionally, the sections are numbered correctly.
Abstract coherence and completeness

Fix grammar and logic: “compounded by an arid and low-income country” → “as an arid, lower-middle-income country.” This has been rectified.

Align claims with results: the abstract says institutional quality reduces degradation, but results show a positive link. An adjustment was made that "institutional quality increases environmental degradation".

Finish the broken concluding sentence and the ESG line so they read as complete sentences. The sentence has been made complete as follows:" Additionally, the study encourages environmental, social, and governance (ESG)-led business investments through enhanced sustainability reporting requirements for listed firms, as these measures support the principles of sustainable development and the triple bottom line rather than prioritising profit maximisation alone".

· Variable and model consistency

Define the full regressor set once and use it consistently. You introduce CO₂, IQ, FSD, TO, REC, GDP, but the ARDL equation also includes FDI and an unexplained aqt term. Either drop FDI everywhere or add it to the data, tables, and narrative. "FDI has been dropped in the whole article".

Use the same GDP measure throughout: Table 1 uses logGDP, text says “GDP growth.” Used the term GDP and lnGDP as all variables have been transformed for uniformity and easy measurement.

Fix typos in symbols: TO is written as T0 in the ARDL, and FDIt appears without prior definition. T0 has been rectified to "TO" and also FDI has been removed.

· Statistical claims and tests

Remove the incorrect claim that “low standard deviations indicate normality.” Descriptives do not test normality. This has been removed as suggested.

Clean the unit-root table: replace comma decimals (e.g., −3,462) with points, standardise significance stars, and ensure each series’ integration order is stated once. The comma has been removed and the correct one has been used.

In the bounds section, fix “if?” and clarify the decision rule text. The " if " has been removed and an explanation has been used to clarify the decision.

· Tables, diagnostics, and terminology

Correct test names: “Brush Pagan” → Breusch-Pagan; “Jarqa Bera” → Jarque-Bera. (This has been corrected)

Ensure Table 4–5 coefficients are interpreted consistently with the narrative; reconcile the IQ sign with the write-up. (The IQ sign and narrative have been reconciled to show that increased institutional quality increases environmental degradation)

State exactly what the ECT value implies and avoid mixing “within a year” with “1.079 years” without showing the conversion. (This has been rectified)

· Editing and formatting fixes

“Question 5 presents the conclusions” → “Section 5 presents…”. This has been rectified

Fix spacing and typos: “Chamber ofMines,” “mode is supported,” “reduction degradation,” space in “$ 640 million.” (The typo has been rectified)

Ensure section numbering, references, and data links are consistent; avoid linking to Mendeley draft URLs in an indexed manuscript. The draft link has been removed and replaced with the published and correct link for data. Additionally, the sections are numbered correctly.
Competing Interests: No competing interests Close
Report a concern
Respond or Comment

COMMENTS ON THIS REPORT

Author Response 30 Sep 2025

Brigitte FIkunawa, Business and Economic Science, Nelson Mandela University, Port Elizabeth, South Africa

30 Sep 2025

Author Response

1. The proposed changes in the abstract have been attended to and rectified.
2. All typos have been rectified
3. The variable logGDP had been renamed to GDP to represent ... Continue reading 1. The proposed changes in the abstract have been attended to and rectified.
2. All typos have been rectified
3. The variable logGDP had been renamed to GDP to represent GDP growth,
4. FDI was a typo and redundant. It has been removed from the ARDL equation.
5. The ECM has been rectified and addressed
6. Institutional quality explanation and sign have been aligned.
7. The link for extended data has been rectified with the correct link.
1. The proposed changes in the abstract have been attended to and rectified.
2. All typos have been rectified
3. The variable logGDP had been renamed to GDP to represent GDP growth,
4. FDI was a typo and redundant. It has been removed from the ARDL equation.
5. The ECM has been rectified and addressed
6. Institutional quality explanation and sign have been aligned.
7. The link for extended data has been rectified with the correct link.
Competing Interests: No competing interests Close
Report a concern
Author Response 09 Jun 2026

Brigitte FIkunawa, Business and Economic Science, Nelson Mandela University, Port Elizabeth, South Africa

09 Jun 2026

Author Response
Abstract coherence and completeness
- Fix grammar and logic: “compounded by an arid and low-income country” → “as an arid, lower-middle-income country.” This has been rectified.
- Align claims with
... Continue reading
Abstract coherence and completeness

Fix grammar and logic: “compounded by an arid and low-income country” → “as an arid, lower-middle-income country.” This has been rectified.

Align claims with results: the abstract says institutional quality reduces degradation, but results show a positive link. An adjustment was made that "institutional quality increases environmental degradation".

Finish the broken concluding sentence and the ESG line so they read as complete sentences. The sentence has been made complete as follows:" Additionally, the study encourages environmental, social, and governance (ESG)-led business investments through enhanced sustainability reporting requirements for listed firms, as these measures support the principles of sustainable development and the triple bottom line rather than prioritising profit maximisation alone".

· Variable and model consistency

Define the full regressor set once and use it consistently. You introduce CO₂, IQ, FSD, TO, REC, GDP, but the ARDL equation also includes FDI and an unexplained aqt term. Either drop FDI everywhere or add it to the data, tables, and narrative. "FDI has been dropped in the whole article".

Use the same GDP measure throughout: Table 1 uses logGDP, text says “GDP growth.” Used the term GDP and lnGDP as all variables have been transformed for uniformity and easy measurement.

Fix typos in symbols: TO is written as T0 in the ARDL, and FDIt appears without prior definition. T0 has been rectified to "TO" and also FDI has been removed.

· Statistical claims and tests

Remove the incorrect claim that “low standard deviations indicate normality.” Descriptives do not test normality. This has been removed as suggested.

Clean the unit-root table: replace comma decimals (e.g., −3,462) with points, standardise significance stars, and ensure each series’ integration order is stated once. The comma has been removed and the correct one has been used.

In the bounds section, fix “if?” and clarify the decision rule text. The " if " has been removed and an explanation has been used to clarify the decision.

· Tables, diagnostics, and terminology

Correct test names: “Brush Pagan” → Breusch-Pagan; “Jarqa Bera” → Jarque-Bera. (This has been corrected)

Ensure Table 4–5 coefficients are interpreted consistently with the narrative; reconcile the IQ sign with the write-up. (The IQ sign and narrative have been reconciled to show that increased institutional quality increases environmental degradation)

State exactly what the ECT value implies and avoid mixing “within a year” with “1.079 years” without showing the conversion. (This has been rectified)

· Editing and formatting fixes

“Question 5 presents the conclusions” → “Section 5 presents…”. This has been rectified

Fix spacing and typos: “Chamber ofMines,” “mode is supported,” “reduction degradation,” space in “$ 640 million.” (The typo has been rectified)

Ensure section numbering, references, and data links are consistent; avoid linking to Mendeley draft URLs in an indexed manuscript. The draft link has been removed and replaced with the published and correct link for data. Additionally, the sections are numbered correctly.
Abstract coherence and completeness

Fix grammar and logic: “compounded by an arid and low-income country” → “as an arid, lower-middle-income country.” This has been rectified.

Align claims with results: the abstract says institutional quality reduces degradation, but results show a positive link. An adjustment was made that "institutional quality increases environmental degradation".

Finish the broken concluding sentence and the ESG line so they read as complete sentences. The sentence has been made complete as follows:" Additionally, the study encourages environmental, social, and governance (ESG)-led business investments through enhanced sustainability reporting requirements for listed firms, as these measures support the principles of sustainable development and the triple bottom line rather than prioritising profit maximisation alone".

· Variable and model consistency

Define the full regressor set once and use it consistently. You introduce CO₂, IQ, FSD, TO, REC, GDP, but the ARDL equation also includes FDI and an unexplained aqt term. Either drop FDI everywhere or add it to the data, tables, and narrative. "FDI has been dropped in the whole article".

Use the same GDP measure throughout: Table 1 uses logGDP, text says “GDP growth.” Used the term GDP and lnGDP as all variables have been transformed for uniformity and easy measurement.

Fix typos in symbols: TO is written as T0 in the ARDL, and FDIt appears without prior definition. T0 has been rectified to "TO" and also FDI has been removed.

· Statistical claims and tests

Remove the incorrect claim that “low standard deviations indicate normality.” Descriptives do not test normality. This has been removed as suggested.

Clean the unit-root table: replace comma decimals (e.g., −3,462) with points, standardise significance stars, and ensure each series’ integration order is stated once. The comma has been removed and the correct one has been used.

In the bounds section, fix “if?” and clarify the decision rule text. The " if " has been removed and an explanation has been used to clarify the decision.

· Tables, diagnostics, and terminology

Correct test names: “Brush Pagan” → Breusch-Pagan; “Jarqa Bera” → Jarque-Bera. (This has been corrected)

Ensure Table 4–5 coefficients are interpreted consistently with the narrative; reconcile the IQ sign with the write-up. (The IQ sign and narrative have been reconciled to show that increased institutional quality increases environmental degradation)

State exactly what the ECT value implies and avoid mixing “within a year” with “1.079 years” without showing the conversion. (This has been rectified)

· Editing and formatting fixes

“Question 5 presents the conclusions” → “Section 5 presents…”. This has been rectified

Fix spacing and typos: “Chamber ofMines,” “mode is supported,” “reduction degradation,” space in “$ 640 million.” (The typo has been rectified)

Ensure section numbering, references, and data links are consistent; avoid linking to Mendeley draft URLs in an indexed manuscript. The draft link has been removed and replaced with the published and correct link for data. Additionally, the sections are numbered correctly.
Competing Interests: No competing interests Close
Report a concern

Comments on this article Comments (0)

Version 3

VERSION 3 PUBLISHED 11 Aug 2025

Open Peer Review

Reviewer Status

Reviewer Reports

	Invited Reviewers
	1	2	3	4
Version 3 (revision) 24 Jun 26
Version 2 (revision) 06 Oct 25		read	read	read
Version 1 11 Aug 25	read

Tafirenyika Sunde, North-West University, Potchefstroom, South Africa
Kwadwo Boateng Prempeh, Sunyani Technical University, Sunyani, Ghana
Rui Alexandre Castanho, Instituto Politécnico de Portalegre (IPP), Portalegre, Portugal
Muntasir Murshed, Daffodil International University, Dhaka, Bangladesh

Comments on this article

All Comments(0)

Add a comment

Browse by related subjects

Back to all reports

Reviewer Report

9 Views

08 Jan 2026 | for Version 2

Muntasir Murshed, Daffodil International University, Dhaka, Bangladesh

9 Views Cite this report Responses(1)

Approved With Reservations

Is the work clearly and accurately presented and does it cite the current literature?

Partly
Is the study design appropriate and is the work technically sound?

Yes
Are sufficient details of methods and analysis provided to allow replication by others?

Yes
If applicable, is the statistical analysis and its interpretation appropriate?

Yes
Are all the source data underlying the results available to ensure full reproducibility?

Yes
Are the conclusions drawn adequately supported by the results?

Yes

Competing Interests

No competing interests were disclosed.

Reviewer Expertise

Environmental Economics

Respond to this report

Responses (1)

Author Response

09 Jun 2026

Brigitte FIkunawa, Business and Economic Science, Nelson Mandela University, Port Elizabeth, South Africa

a. The abstract could be improved by clearly and concisely presenting the research objectives, data, and methodology, key findings, and principal policy implications.
The abstract has been amplified to clearly enhance the quality of the abstract as suggested in the comment.
b. Strengthening the introduction with a more comprehensive background and theoretical context would help readers better understand the motivation and relevance of the study.
The introduction has been improved, enhancing the background and also including theoretical context such as the theory of institutions.
c. Clearly identifying the gaps in the existing literature and explicitly stating the study’s contributions would significantly improve the positioning of the research.
The gap has been identify and contribution of the study has been included in the 2nd last paragraph of the introduction.
d. Including a brief overview of the main findings at the end of the introduction would enhance coherence and guide the reader through the paper.
The main findings have been included in the 2nd last paragraph, including the methodology used and the findings
e. The literature review would benefit from broader coverage, particularly by incorporating recent and relevant studies published within the last two to three years.
The empirical literature reviewed has been expanded and includes some recent studies from 2025 and 2024.
f. Providing stronger justification for the chosen methodology, including a discussion of its suitability and advantages, would improve the credibility of the empirical analysis.
The suitability of ARDL is noted: "the ARDL approach remains appropriate for this study because it is widely recognized for its suitability in small sample time series analysis and for variables integrated at different orders, provided none are integrated beyond I(1)".
g. The findings could be more deeply embedded within relevant theoretical frameworks and discussed in relation to prior empirical studies, highlighting both consistencies and deviations.
The findings have been amplified and also included referencing theoretical frameworks; results inconsistent with previous studies have been acknowledged and explained.
h. The conclusion could be made more concise while clearly emphasizing the key contributions and implications of the study.
The conclusion, implications and contribution have been enhanced further.
i. Policy recommendations could be sharpened by making them more specific, actionable, and directly derived from the empirical findings, rather than remaining generic.
Policy recommendations have been improved and made more action-oriented and specific.
j. Expanding the discussion on future research directions would help identify promising avenues for extending and deepening the current analysis
Discussion for future studies has been expanded further.

View more View less

Competing Interests

No competing interests

Back to all reports

Reviewer Report

13 Views

07 Jan 2026 | for Version 2

Rui Alexandre Castanho, Instituto Politécnico de Portalegre (IPP), Portalegre, Portugal

13 Views Cite this report Responses(1)

Not Approved

Is the work clearly and accurately presented and does it cite the current literature?

Partly
Is the study design appropriate and is the work technically sound?

Partly
Are sufficient details of methods and analysis provided to allow replication by others?

Partly
If applicable, is the statistical analysis and its interpretation appropriate?

Partly
Are all the source data underlying the results available to ensure full reproducibility?

Partly
Are the conclusions drawn adequately supported by the results?

No

Competing Interests

No competing interests were disclosed.

Reviewer Expertise

Sustainable development economics; environmental and climate policy; financial development and green finance; institutional quality and governance.

Respond to this report

Responses (1)

Author Response

09 Jun 2026

Brigitte FIkunawa, Business and Economic Science, Nelson Mandela University, Port Elizabeth, South Africa

Clarity is reduced by inconsistent terminology, unresolved confusion about variable definitions (notably GDP versus log GDP), limited explanation of key indicators, and insufficient methodological detail for full replicability.

GDP has been used consistently and after the log transformation, all variables, including GDP, are defined as lnGDP
The key indicators have been explained in terms of proxy data sources; additionally, the methodology approach has been explained and justification for suitability has been included in the revised version.

More importantly, the interpretation of the results and the resulting conclusions raise significant concerns. The positive relationship identified between institutional quality and environmental degradation is not clearly explained and contradicts both the paper’s theoretical framework and its policy recommendations, which support strengthening institutions.

The positive relationship between institutional quality and environmental degradation has been revised to explain that institutional quality increased environmental degradation. Additionally, it has been explained based on the theories and previous studies that found similar findings that good quality institutions tend to encourage economic activities, which further exacerbates degradation.

This inconsistency, along with the absence of robustness checks, small-sample limitations, and weak alignment between empirical findings and policy implications, undermines the study’s scientific validity. Substantial revisions are needed to clarify variable construction, improve methodological transparency, address the institutional quality result, and ensure that conclusions and recommendations are fully supported by the evidence.

robustness check has been included;
small sample limitation has been acknowledged, and methodological approach suitability has been explained and justified.
the findings and policy implications have been aligned correctly to enhance outcomes

View more View less

Competing Interests

no competing interests

Back to all reports

Reviewer Report

17 Views

28 Oct 2025 | for Version 2

Kwadwo Boateng Prempeh, Accounting and Business Analyt, Sunyani Technical University, Sunyani, Brong Ahafo Region, Ghana

17 Views Cite this report Responses(0)

Not Approved

Is the work clearly and accurately presented and does it cite the current literature?

Partly
Is the study design appropriate and is the work technically sound?

Partly
Are sufficient details of methods and analysis provided to allow replication by others?

Partly
If applicable, is the statistical analysis and its interpretation appropriate?

Partly
Are all the source data underlying the results available to ensure full reproducibility?

Partly
Are the conclusions drawn adequately supported by the results?

No

Competing Interests

No competing interests were disclosed.

Reviewer Expertise

Sustainable Development, Financial Development, Renewable energy, corporate finance

Respond to this report

Responses (0)

Back to all reports

Reviewer Report

24 Views

23 Sep 2025 | for Version 1

Tafirenyika Sunde, North-West University, Potchefstroom, South Africa

24 Views Cite this report Responses(2)

Approved With Reservations

Comments and Suggestions

· Abstract coherence and completeness

Fix grammar and logic: “compounded by an arid and low-income country” → “as an arid, lower-middle-income country.”
Align claims with results: abstract says institutional quality reduces degradation, but results show a positive link.
Finish the broken concluding sentence and the ESG line so they read as complete sentences.

· Variable and model consistency

Define the full regressor set once and use it consistently. You introduce CO₂, IQ, FSD, TO, REC, GDP, but the ARDL equation also includes FDI and an unexplained aqt term. Either drop FDI everywhere or add it to the data, tables, and narrative.
Use the same GDP measure throughout: Table 1 uses logGDP, text says “GDP growth.”
Fix typos in symbols: TO is written as T0 in the ARDL, and FDIt appears without prior definition.

· Statistical claims and tests

Remove the incorrect claim that “low standard deviations indicate normality.” Descriptives do not test normality.

Clean the unit-root table: replace comma decimals (e.g., −3,462) with points, standardise significance stars, and ensure each series’ integration order is stated once.

In the bounds section, fix “if?” and clarify the decision rule text.

· Tables, diagnostics, and terminology

Correct test names: “Brush Pagan” → Breusch-Pagan; “Jarqa Bera” → Jarque-Bera.

Ensure Table 4–5 coefficients are interpreted consistently with the narrative; reconcile the IQ sign with the write-up.

State exactly what the ECT value implies and avoid mixing “within a year” with “1.079 years” without showing the conversion.

· Editing and formatting fixes

“Question 5 presents the conclusions” → “Section 5 presents…”.

Fix spacing and typos: “Chamber ofMines,” “mode is supported,” “reduction degradation,” space in “$ 640 million.”

Ensure section numbering, references, and data links are consistent; avoid linking to Mendeley draft URLs in an indexed manuscript.

Is the work clearly and accurately presented and does it cite the current literature?

Yes
Is the study design appropriate and is the work technically sound?

Yes
Are sufficient details of methods and analysis provided to allow replication by others?

Yes
If applicable, is the statistical analysis and its interpretation appropriate?

Yes
Are all the source data underlying the results available to ensure full reproducibility?

No source data required
Are the conclusions drawn adequately supported by the results?

Yes

Competing Interests

No competing interests were disclosed.

Reviewer Expertise

Economics, Econometrics, environmental studies and public policy.

Respond to this report

Responses (2)

Author Response

09 Jun 2026

Brigitte FIkunawa, Business and Economic Science, Nelson Mandela University, Port Elizabeth, South Africa

Abstract coherence and completeness

Fix grammar and logic: “compounded by an arid and low-income country” → “as an arid, lower-middle-income country.” This has been rectified.
Align claims with results: the abstract says institutional quality reduces degradation, but results show a positive link. An adjustment was made that "institutional quality increases environmental degradation".
Finish the broken concluding sentence and the ESG line so they read as complete sentences. The sentence has been made complete as follows:" Additionally, the study encourages environmental, social, and governance (ESG)-led business investments through enhanced sustainability reporting requirements for listed firms, as these measures support the principles of sustainable development and the triple bottom line rather than prioritising profit maximisation alone".

· Variable and model consistency

Define the full regressor set once and use it consistently. You introduce CO₂, IQ, FSD, TO, REC, GDP, but the ARDL equation also includes FDI and an unexplained aqt term. Either drop FDI everywhere or add it to the data, tables, and narrative. "FDI has been dropped in the whole article".
Use the same GDP measure throughout: Table 1 uses logGDP, text says “GDP growth.” Used the term GDP and lnGDP as all variables have been transformed for uniformity and easy measurement.
Fix typos in symbols: TO is written as T0 in the ARDL, and FDIt appears without prior definition. T0 has been rectified to "TO" and also FDI has been removed.

· Statistical claims and tests

Remove the incorrect claim that “low standard deviations indicate normality.” Descriptives do not test normality. This has been removed as suggested.

Clean the unit-root table: replace comma decimals (e.g., −3,462) with points, standardise significance stars, and ensure each series’ integration order is stated once. The comma has been removed and the correct one has been used.

In the bounds section, fix “if?” and clarify the decision rule text. The " if " has been removed and an explanation has been used to clarify the decision.

· Tables, diagnostics, and terminology

Correct test names: “Brush Pagan” → Breusch-Pagan; “Jarqa Bera” → Jarque-Bera. (This has been corrected)

Ensure Table 4–5 coefficients are interpreted consistently with the narrative; reconcile the IQ sign with the write-up. (The IQ sign and narrative have been reconciled to show that increased institutional quality increases environmental degradation)

State exactly what the ECT value implies and avoid mixing “within a year” with “1.079 years” without showing the conversion. (This has been rectified)

· Editing and formatting fixes

“Question 5 presents the conclusions” → “Section 5 presents…”. This has been rectified

Fix spacing and typos: “Chamber ofMines,” “mode is supported,” “reduction degradation,” space in “$ 640 million.” (The typo has been rectified)

Ensure section numbering, references, and data links are consistent; avoid linking to Mendeley draft URLs in an indexed manuscript. The draft link has been removed and replaced with the published and correct link for data. Additionally, the sections are numbered correctly.

View more View less

Competing Interests

No competing interests

Alongside their report, reviewers assign a status to the article:

Approved - the paper is scientifically sound in its current form and only minor, if any, improvements are suggested

Approved with reservations - A number of small changes, sometimes more significant revisions are required to address specific details and improve the papers academic merit.

Not approved - fundamental flaws in the paper seriously undermine the findings and conclusions

[1] Achuo ED, Miamo CW, Nchofoung TN: Energy consumption and environmental sustainability: What lessons for posterity? Energy Rep. 2022; 8: 12491–12502. Publisher Full Text

[2] Ahmad M, et al.: Financial development and environmental degradation: Do human capital and institutional quality make a difference? Gondwana Res. 2022; 105: 299–310. Publisher Full Text

[3] Akpan U, Kama U: Does institutional quality really matter for environmental quality ? Energy & Environment. 2024; 35(8): 4361–4385. Publisher Full Text

[4] Aladejare SA: Natural resource rents, globalisation and environmental degradation: New insight from 5 richest African economies. Res. Policy. 2022; 78(June): 102909. Publisher Full Text

[5] Ali HS, et al.: Financial development and carbon dioxide emissions in Nigeria: Evidence from the ARDL bounds approach. GeoJournal. 2019; 84(3): 641–655. Publisher Full Text

[6] Amer EAAA, et al.: The impact of natural resources on environmental degradation: a review of ecological footprint and CO₂ emissions as indicators. Front. Environ. Sci. 2024; 12(March): 1–14. Publisher Full Text

[7] Amin A, et al.: Financial Development, Institutional Quality, and the Influence of Various Environmental Factors on Carbon Dioxide Emissions: Exploring the Nexus in China. Front. Environ. Sci. 2022; 9(February): 1–10. Publisher Full Text

[8] Anwar A, et al.: Modelling the Macroeconomic Determinants of Carbon Dioxide Emissions in the G-7 Countries: The Roles of Technological Innovation and Institutional Quality Improvement. Glob. Bus. Rev. 2021;26: 823–845 [Preprint]. Publisher Full Text

[9] Anwar A, Malik S, Ahmad P: Cogitating the role of Technological Innovation and Institutional Quality in Formulating the Sustainable Development Goal Policies for E7 Countries: Evidence from Quantile Regression. Glob. Bus. Rev. 2022 [Preprint]. Publisher Full Text

[10] Awdeh A: The Impact of Financial Development and Institutional Quality on Environmental Conditions: Evidence from the MENA Region. Review of Middle East Economics and Finance. 2022; 18(2): 81–105. Publisher Full Text

[11] Aydin M, Sogut Y, Erdem A: The role of environmental technologies, institutional quality, and globalization on environmental sustainability in European Union countries: new evidence from advanced panel data estimations. Environ. Sci. Pollut. Res. 2024; 31(7): 10460–10472. PubMed Abstract | Publisher Full Text | Free Full Text

[12] Bank of Namibia: Bank of Namibia Annual Report 2023. Windhoek; 2023.

[13] Burgess JC, Barbier EB: Sustainability and environmental economics: A status quo. In Banerjee A, editor. Oxford Research Encyclopedia of Economics and Finance. Oxford University Press; 2025. Publisher Full Text

[14] Chamber of Mines of Namibia: Annual Review of the Chamber of Mines of Namibia 2023. Windhoek; 2024.

[15] Cohen S: Environmentally Sustainable Growth: A Pragmatic Approach. :Columbia University Press; 2023.

[16] Curran D: The Treadmill of Production and the Positional Economy of Consumption. Can. Rev. Sociol. 2017; 54(1): 28–47. PubMed Abstract | Publisher Full Text

[17] Doğan B, Saboori B, Can M: Does economic complexity matter for environmental degradation? An empirical analysis for different stages of development. Environ. Sci. Pollut. Res. 2019; 26: 31900–31912. PubMed Abstract | Publisher Full Text

[18] Fikunawa B: FSD & IQ and Environmental degradation. Mendeley Data. 2026; V3. Publisher Full Text

[19] Ganda F: The nexus of financial development, natural resource rents, technological innovation, foreign direct investment, energy consumption, human capital, and trade on environmental degradation in the new BRICS economies. Environ. Sci. Pollut. Res. 2022; 29(49): 74442–74457. PubMed Abstract | Publisher Full Text | Free Full Text

[20] Government of the Republic of Namibia: Namibia’s Nationally Determined Contribution 2023. Windhoek; 2023.

[21] Gul R, Hussain S: Unlocking sustainable futures: Exploring the non-linear linkages between green finance and environmental sustainability in developing countries. J. Environ. Manag. 2024; 370(September): 122971. PubMed Abstract | Publisher Full Text

[22] Gutti B, Aji MM, Magaji G: Environmental Impact of Natural Resources Exploitation in Nigeria and the Way Forward. Journal of Applied Technology in Environmental Sanitation. 2012; 2(2): 95–102.

[23] Habiba U, Xinbang C: An Investigation of the Dynamic Relationships Between Financial Development, Renewable Energy Use, and CO₂ Emissions. SAGE Open. 2022; 12(4): 1–21. Publisher Full Text

[24] Huang J, Guo L: Analysis of the impact of natural resource rent, transportation infrastructure, innovation and financial development on China’s carbon emission. Energy and Environment. 2023; 34(6): 1805–1825. Publisher Full Text

[25] Hunjra AI, et al.: Economic growth and environmental sustainability in developing economies. Res. Int. Bus. Financ. 2024; 70: 102341. Publisher Full Text

[26] Hussain M, Dogan E: The role of institutional quality and environment-related technologies in environmental degradation for BRICS. J. Clean. Prod. 2021; 304: 127059. Publisher Full Text

[27] Hussein HA, Warsame AA, Abdi AH: Exploring the impacts of institutional quality, urbanization, and disaggregate globalization on environmental pollution in Somalia. Cogent Econ. Finance. 2025; 13(1). Publisher Full Text

[28] Imran A, et al.: Nexus between green finance, environmental degradation, and sustainable development: Evidence from developing countries. Res. Policy. 2023; 81(January): 103371. Publisher Full Text

[29] IPCC: Climate Change and Land: an IPCC special report on Climate change, desertification, land degradation, sustainable land management, food security and greenhouse gas fluxes in terrestrial ecosystem, Climate Change and Land. Cambridge University Press; 2019. Publisher Full Text

[30] Islam S, Hossain I: The Global Treadmill of Production and the Environment. Social Justice in the Globalization of Production. London: Palgrave Macmillan; 2015; 144–158. Publisher Full Text

[31] Karedla Y, Mishra R, Patel N: The impact of economic growth, trade openness and manufacturing on CO₂ emissions in India: an autoregressive distributive lag (ARDL) bounds test approach. Journal of Economics, Finance and Administrative Science. 2021; 26(52): 376–389. Publisher Full Text

[32] Khan H, Weili L, Khan I: Institutional quality, financial development and the influence of environmental factors on carbon emissions: evidence from a global perspective. Environ. Sci. Pollut. Res. 2022a; 29(9): 13356–13368. PubMed Abstract | Publisher Full Text

[33] Khan H, Weili L, Khan I: The role of financial development and institutional quality in environmental sustainability: panel data evidence from the BRI countries. Environ. Sci. Pollut. Res. 2022b; 29: 83624–83635. Publisher Full Text

[34] Kirikkaleli D, Adebayo TS: Do renewable energy consumption and financial development matter for environmental sustainability? New global evidence. Sustain. Dev. 2021; 29(4): 583–594. Publisher Full Text

[35] Lauer A, Llases L, López-Muñoz P: Toward global environmental scenarios for (and by) the “bottom billion”? Environ. Sci. Policy. 2025; 174: 104268. Publisher Full Text

[36] Leal PH, Marques AC: The evolution of the environmental Kuznets curve hypothesis assessment: A literature review under a critical analysis perspective. Heliyon. 2022; 8(11): e11521. PubMed Abstract | Publisher Full Text | Free Full Text

[37] Lewis TL: Globalizing the treadmill of production: a solutions-oriented application to Ecuador. Environmental Sociology. 2019; 5(3): 219–231. Publisher Full Text

[38] Li D, et al.: Does institutional quality matter for environmental sustainability? Front. Environ. Sci. 2022; 10(July): 1–12. Publisher Full Text

[39] Li W, Wei Y, Chen L, et al.: Multiple environmental inequalities between Global South and Global North in over 10,000 urban centers [Preprint]. Res. Sq. 2025. Publisher Full Text

[40] Naseer MM, Hunjra AI, Palma A, et al.: Sustainable development goals and environmental performance: Exploring the contribution of governance, energy, and growth. Res. Int. Bus. Finance. 2025: 73. Publisher Full Text

[41] Ngarava S: Relationship between economic diversification and CO2 emissions: ARDL-EC modeling in South Africa. Development Studies Research. 2021; 8(1): 264–279. Publisher Full Text

[42] Nkoro E, Uko AK: Autoregressive Distributed Lag (ARDL) cointegration technique: application and interpretation. J. Stat. Econ. Methods. 2016; 5(3): 63–91.

[43] Observatory of the Sahara and Sahel (OSS): African ecosystems: Between degradation and restoration. OSS. 2022. https://oss-online.org/sites/default/files/2022-06/OSS-LivreEcosystemesAfrique_En_0.pdf

[44] Pesaran H, Shin Y, Smith RJ: Bounds testing approaches to the analysis of level relationships. J. Appl. Econ. 2001; 16(3): 289–326. Publisher Full Text

[45] Prempeh KB: The role of economic growth, financial development, globalization, renewable energy and industrialization in reducing environmental degradation in the economic community of West African States. Cogent Economics & Finance. 2024; 12(1): 2308675. Publisher Full Text

[46] Raihan A: Nexus between economic growth, natural resources rents, trade globalization, financial development, and carbon emissions toward environmental sustainability in Uruguay. Electronic Journal of Education, Social Economics and Technology. 2023; 4(2): 55–65. Publisher Full Text

[47] Sadaoui N, et al.: The moderating role of natural resources between governance and CO₂ emissions: Evidence from MENA countries. Energy and Environment. 2024; 35(3): 1597–1615. Publisher Full Text

[48] Sakariyahu R, Fagbemi T, Adigun R, et al.: Severity of environmental degradation and the impact on quality of life in Africa. J. Environ. Manage. 2024; 356: 120537. Publisher Full Text

[49] Sajeev A, Kaur S: Environmental sustainability, trade and economic growth in India: implications for public policy. 2020; 4(2): 141–160. Publisher Full Text

[50] Schnaiberg A, Pellow DN, Weinberg A: The Treadmill of Production and the Environmental State. Social Problems and Public Policy. 2002; 10: 15–32. Publisher Full Text

[51] Shakeel M, Nobre C: Do clean fuel and trade-openness reduce environmental degradation in China: evidence from asymmetric model. Frontiers in Energy Research. 2024; 12: 1–13. Publisher Full Text

[52] Sibanda K, et al.: Natural Resource Rents, Institutional Quality, and Environmental Degradation in Resource-Rich Sub-Saharan African Countries. Sustainability (Switzerland). 2023; 15(2) Publisher Full Text

[53] Sida: Environmental and Climate Change Indicators: Guidance at country and sector level. Stockholm; 2011. https://cdn.sida.se/publications/files/sida61411en-environmental-and-climate-change-indicators.pdf

[54] Song Y, et al.: Does an environmental stringent policy really matter to achieve environmental sustainability in BRICS-T region? Evidence from novel method of moments quantile regression approach. J. Environ. Manag. 2024; 368(July): 121898. PubMed Abstract | Publisher Full Text

[55] Stern DI: Environmental Kuznets curve. In Encyclopedia of Energy. Elsevier; 2004; pp. 517–525. Publisher Full Text

[56] Stern DI: The environmental Kuznets curve: A review. 2014: 1404. Publisher Full Text

[57] Thi D, Pham T, Nguyen HT: Effects of trade openness on environmental quality: evidence from developing countries. J. Appl. Econ. 2024; 27(1). Publisher Full Text

[58] Tran T, et al.: Renewable Energy, Urbanization, Financial Development and Environmental Degradation in the ASEAN Countries. Environ. Urban. ASIA. 2023; 14(1): 10–23. Publisher Full Text

[59] Udemba NE: Mitigating the environmental degradation with institutional quality and foreign direct investment (FDI): new evidence from asymmetric approach. Environ. Sci. Pollut. Res. 2021; 28(32). Publisher Full Text

[60] Usman M, Makhdum MSA, Kousar R: Does financial inclusion, renewable and non-renewable energy utilization accelerate ecological footprints and economic growth? Fresh evidence from 15 highest emitting countries. Sustain. Cities Soc. 2021; 65(November 2020): 102590. Publisher Full Text

[61] Warsame AA, et al.: Renewables and institutional quality mitigate environmental degradation in Somalia. Renew. Energy. 2022; 194: 1184–1191. Publisher Full Text

[62] World Bank Group: Climate Risk Country Profile: Namibia. Washington DC; 2021. https://climateknowledgeportal.worldbank.org/sites/default/files/2021-08/15931-WB_Namibia%20Country%20Profile-WEB.pdf

[63] Xaisongkham S, Liu X: Institutional quality, employment, FDI and environmental degradation in developing countries: evidence from the balanced panel GMM estimator. Int. J. Emerg. Mark. 2024; 19(7): 1920–1939. Publisher Full Text

[64] Zuo S, et al.: The dynamic impact of natural resource rents, financial development, and technological innovations on environmental quality: Empirical evidence from BRI economies. Int. J. Environ. Res. Public Health. 2022; 19(1): 1–17. PubMed Abstract | Publisher Full Text | Free Full Text

[65] Zhang S, Xu G, Shu Y, et al.: Comparing developed and emerging nations’ economic development with environmental footprint for low-carbon competitiveness. Heliyon. 2024; 10(14): e34039. Publisher Full Text

Financial Sector Development, Institutional Quality and Environmental Degradation in Namibia

Abstract

Background

Methods

Results

Conclusion

Keywords

Revised Amendments from Version 2

1.

Introduction

2.

Related literature review

Theoretical literature review

2.1

Empirical literature review

2.2

Hypothesis 1:

Hypothesis 2:

3.

Data and methods

(1)

Table 1. Data sources and description.

Table 2. Descriptive statistics.

(2)

4.

Empirical results and discussion

Unit root tests, lag length selection and bound cointegration

4.1

Table 3. Unit root analysis.

Table 4. ARDL bound results.

Table 5. Lag order criteria.

Estimation of long and short-run coefficients

4.2

Table 6. Long -run coefficients.

Table 7. Short-run coefficients.

Figure 1. CUSUM.

Granger causality

4.3

Table 8. Granger causality results.

Robustness check

4.4

Table 9. Robust tests results.

5.

Conclusion

Ethics and consent statement

Data availability statement

Extended data

References

Comments on this article Comments (0)

Open Peer Review

Comments on this article Comments (0)

Open Peer Review

Reviewer Status

Reviewer Reports

Comments on this article

Browse by related subjects

Competing Interests Policy

Stay Updated