FINANCIAL DEVELOPMENT, GEOPOLITICAL RISKS AND SUSTAINABLE MATTER: TIME TO RAISE A W ARENESS. A STUDY OF A GLOBAL

BỘ GIÁO DỤC VÀ ĐÀO TẠO ĐẠI HỌC KINH TẾ TP HỒ CHÍ MINH

ĐỀ TÀI NGHIÊN CỨU KHOA HỌC THAM GIA CUỘC THI

“SFR SCIENTIFIC RESEARCH 2024”

FINANCIAL DEVELOPMENT, GEOPOLITICAL RISKS AND SUSTAINABLE MATTER: TIME TO RAISE AWARENESS A STUDY OF A GLOBAL

The purpose of the present study is to investigate the direct effect of financialdevelopment, natural resources rents, eco-innovation and geopolitical risk onsustainable development across a diverse set of 25 countries The study analyzes therelationships between these factors and sustainable development aims to providesignificant insights into how many facets of economic, environmental, and geopoliticaldynamics influence the pursuit of long-term sustainability goals To accomplish this,complex econometric tests are applied to yearly data from 1990 to 2020 The authorsuse the following models in this study: Pooled ordinary least squares regression model(Pooled OLS), fixed-effects model (FEM), random effects model (REM), andFeasible General Least Squared (FGLS) to estimate the variables

Key words: sustainable development, financial development, geopolitical risks, eco-innovation, natural resources rents, economic growth, OLS, FEM, REM, FGLS

Highlights:

● Explored financial development, resource rents, and sustainable developmentnexus

● The role of geopolitical risks in sustainable development is evaluated

● Geopolitical risk has a positive impact on sustainable development

3.2.3 Pooled ordinary least squares regression model (Pooled OLS) 37

3.2.4 Fixed-effect Model (FEM) 383.2.5 Feasible general least squares model (FGLS) 39

LIST OF FIGURES

Figure 1.1: Research process

LIST OF TABLES

Table 2.1: Summary of relevant research papers

Table 3.1: Variable summary

Table 4.1: Descriptive statistics of the variables used

Table 4.2: Pearson correlation analysis and VIF results of variablesTable 4.3: Regression result of the model

of the present generation without harming the ability of future generations to meettheir own needs A comprehensive approach that could include social, environmental,and economic factors in the decision-making process is required for sustainabledevelopment The Sustainable Development Goals (SDGs), a worldwide frameworkfor sustainable development developed by the United Nations in 2015, offer a pathforward to achieve a better and more sustainable future The United Nations Summit

on Sustainable Development established 169 targets in addition to 17 developmentgoals The 17 Sustainable Development Goals included the following: Notimpoverished; Zero hunger; excellent health and wellbeing; gender equality;affordable, clean energy; clean water and sanitation; decent work and economicgrowth; infrastructure, innovation, and industry; decreased inequalities; Communitiesand cities that are sustainable; ethical production and consumption; action againstclimate change; life on land and underwater; justice, peace, and robust institutions;Collaborations for the objectives (Nations, 2015)

Sustainable development and financial development are two related ideas thathave drawn a lot of attention in policy discourse and scholarly literature The financialmarkets and investors are becoming more and more interested in environmental, social,

a result of investors' growing recognition of the significance of sustainability factors inevaluating risk and return The identification of ESG-related risks and opportunities,the guidance of investment decisions, and the promotion of responsible investmentpractices that yield beneficial social and environmental effects in addition to financialreturns are all made possible by research on the relationship between financialdevelopment and sustainable development Furthermore, an increasing amount ofresearch shows that gender equality, inclusive economic growth, and poverty reductioncan all be facilitated by inclusive and sustainable financial institutions Researchers canfind ways that financial inclusion, credit availability, and financial literacy supportmore general development goals by examining the connection between financialdevelopment and sustainable development All aspects of society can benefit frominclusive financial systems that support sustainable development outcomes, and thesepolicies and initiatives can be informed by this knowledge According to Umur et al.(2020), financial development is the enhancement of financial systems and institutionsthat permits better resource allocation, increased financial stability, and greater access

to financial services According to Levine (2005), the financial industry primarilyinfluences investment choices, savings rates, and the rate of technological advancement

in order to promote economic growth Despite some counterarguments, thrivingresearch on the relationship between finance and growth demonstrates that thefinancial sector is essential to economic development (Boikos et al., 2022; Hung, 2023;Hunjra et al., 2021; Mtar and Belazreg, 2023) There hasn't been much research done

on the connection between sustainable development and financial development,though The modern world faces challenging environmental, social, and economicchallenges External conflicts between nations—such as the ongoing conflict betweenRussia and Ukraine—and the ongoing lack of sustainable financial policies, whichcontinue to pose serious obstacles, exacerbate the sustainability risks

Following the current trend, authors are increasingly concerned about theimpact of geopolitical risks on sustainable development in recent years due to severalfactors Firstly, globalization has led to greater interdependence among nations,making them more vulnerable to the effects of geopolitical tensions such as conflicts,trade disputes, and political instability Secondly, rapid technological advancements

and the interconnectedness of global economies have amplified the potential forgeopolitical risks to have far-reaching consequences Additionally, the increasingurgency of addressing climate change and environmental degradation has heightenedawareness of the interconnectedness between geopolitics and sustainability.Geopolitical tensions over natural resources, such as water scarcity or territorialdisputes in ecologically sensitive areas, can exacerbate environmental degradation andhinder efforts to achieve sustainability goals Furthermore, the COVID-19 pandemichas underscored the vulnerability of global supply chains and highlighted the need forresilience in the face of unexpected geopolitical shocks The pandemic has alsoexposed inequalities in access to healthcare and resources, emphasizing the importance

of addressing social and economic disparities as part of sustainable developmentefforts Geopolitical risks that arise from countries' active participation in internationalaffairs are referred to as geopolitical risks It is defined as the risk associated withtensions among nations that have the potential to disrupt international relations,including peace processes It is influenced by both geography and politics (Lee andWang, 2021) A variety of elements are included in geopolitical risks, such as socialunrest, military conflicts, political instability, and economic difficulties (Caldara andIacoviello, 2022) The country's economic and trade activities are negatively impacted

by the increasing frequency of geopolitical events that result from the deepeningeconomic integration and globalization (Sharif et al., 2020) The rise in geopoliticalrisks has been attributed to a number of geopolitical events, such as trade disputes such

as the U.S.-China trade war, political conflicts, terrorist uprisings, and tensions in theMiddle East (Cao et al., 2023) Numerous studies are being conducted by scientistsworldwide to determine how geopolitical events affect sustainable development.Geopolitical risk is complex and can have a number of effects on sustainabledevelopment First off, geopolitical tensions can lead to political instability andconflicts that can obstruct infrastructure development, foreign direct investment, andeconomic activity (Khan et al., 2023; Nguyen et al., 2022, 2023) Furthermore,political instability-induced economic turmoil can cause havoc to financial markets andessential services like healthcare, education, and green investment initiatives.Furthermore, geopolitical risk has the potential to exacerbate environmental

deterioration and hinder the successful adoption of sustainable resource managementtechniques (Ma et al., 2023; Zhang et al., 2023).

Natural resources are necessary for financial development, but as economiesgrow, environmental quality improves because people need clean air The preservation

of natural resources and economic growth are therefore essential to preserving theecological balance of the planet Natural resources are said to contribute to ecologicalcontamination as well (Taghizadeh-Hesary et al., 2022) However, other studies havefound the opposite to be true (Albats et al., 2020), with tourism in particular being one

of the industries with the fastest global growth Additionally, the tourism sector isusing more energy Natural resource depletion has accelerated in tandem with ageneral upward trend in energy consumption Due to their high energy consumption,the tourism and natural resource sectors may aid in financial development, but thewaste they produce may have a detrimental effect on the environment Theoretically,the following factors have an impact on tourism development: natural resources,financial development, energy consumption patterns, and ecological degradation.Natural resources are frequently used in unsustainable methods in regions that areplagued by political unrest or conflict (Wang et al., 2023) Furthermore, according toGupta et al (2019), geopolitical risk may cause a drop in global trade, which mayupset the supply chain for goods Consequently, nations that mainly depend on exports

to propel their economic growth may face unfavorable outcomes Furthermore, thetransfer of technology, knowledge, and resources necessary for eco-innovation can behampered by geopolitical risk (Lee et al., 2023) Furthermore, geopolitical conflictshave the potential to deflect focus and resources from international cooperative effortstowards domestic issues, which could impede the advancement of eco-innovationsrequired to address pressing environmental issues Thus, policymakers need to givesustainable development top priority while reducing geopolitical risk Countries canbuild more resilient and stable economies that are better suited to face challenges in thefuture by promoting sustainable development and managing geopolitical riskeffectively (Zhang et al., 2023)

It is anticipated that countries possessing an abundance of natural resources willexperience increased prosperity and a faster pace of development compared to those

lacking this important natural capital However, this conclusion is only valid for asmall number of nations possessing an abundance of natural resources (Ben-Salha etal., 2021; Jović et al., 2016) For many countries, natural resources are seen more as acurse than a blessing A large number of studies support the claim that nations withscarce natural resources frequently experience faster rates of economic growth thanthose with plentiful resources (Hordofa et al., 2022; Shahbaz et al., 2019; Yasmeen etal., 2021) Natural resources have a negative impact on economic development, which

is explained by the hypothesis of the "natural resource curse," also known as theparadox of plenty It is important to note that, in this specific context, natural resourcerents may pose significant challenges to the realization of sustainable development.Governments can use the money they earn from natural resource extraction to funddevelopment projects It is imperative to recognise, though, that improper handling ofthese rents can result in problems like inequality, corruption, and environmentaldegradation (Ahmad et al., 2020) In order to achieve sustainable development, carefulmanagement of natural resource rents is required to ensure that they are used in waysthat benefit current and future generations This means putting policies in place to stopenvironmental deterioration and lessen the detrimental effects that resource extractionoperations have on the socioeconomic well-being of indigenous communities

Prior to the industrial revolution, technological innovation's contribution to thegrowth of resource income was undervalued, despite its critical role in productivitygrowth Although technology was viewed as exogenous in traditional growth theories(Solow, 1956), endogenous growth theories acknowledged its significant role ininfluencing growth (Romer, 1990) The Fourth Industrial Revolution underscores therole of technology in propelling economic expansion, as it is marked by sophisticatedtechnologies The SDGs have been adversely affected by technologically advancedinitiatives, despite the fact that they have greatly increased global output andcontributed to environmental destruction Fussler and Peter (1996) coined the term

"eco-innovation" to refer to a strategy for tackling the problem of sustainabledevelopment Eco-innovation is now widely acknowledged by academics anddecision-makers as a vital component of sustainable development Eco-innovations cansupport environmentally friendly development while producing economic benefits like

lower costs, increased competitiveness, and effective use of natural resources (Ahmadand Wu, 2022; Hao et al., 2023).

In response to these claims, the study's objective is to examine how financialdevelopment (FD), natural resource rents (NRR), and eco-innovation affect sustainabledevelopment in OECD countries while taking geopolitical risk into account This studycontributes to the literature in a variety of ways by doing this The study firstinvestigates how financial development affects sustainable development Althoughfinancial development's effects on sustainable development have received little andinconsistent attention in the literature, it has primarily been examined in relation toGDP and environmental quality (Cheng et al., 2021; Lv and Li, 2021; Mtar andBelazreg, 2023) The study also looks into how geopolitical risk affects sustainabledevelopment Interestingly, in the context of OECD countries, the impact ofgeopolitical risk on sustainable development is seldom studied and remains unclear.Thirdly, the impact of NRR on sustainable development is evaluated in this study.While there has been research on the relationship between NRR and sustainabledevelopment, it has primarily focused on developing and emerging nations andproduced inconsistent findings (Ahmad et al., 2023b; Koirala and Pradhan, 2020; Leeand He, 2022)

As a result, this study aims to examine this relationship in global insights n anincreasingly connected and dynamic world, sustainable development has emerged as atop goal of countries as well as international organizations Achieving sustainabledevelopment requires a balance between economic growth, social inclusion andenvironmental protection However, this delicate balance is affected by the complexinteraction of many different factors, including geopolitical risks, financialdevelopments, natural resource rents and eco-innovation Understanding theseinfluences is critical to developing effective policies and strategies to promotesustainable development globally Given the global nature of these challenges, it isnecessary to adopt a comprehensive and integrated approach to studying their impact

on sustainable development Different regions face unique challenges andopportunities, and a global perspective can highlight best practices, policy lessons, andcollaborative strategies that can tailor and scale tissue Global insight also emphasizes

the interconnectedness of economies and ecosystems, reinforcing the need forinternational cooperation and collective action.

- Time range: Research data collected from 1990 - 2020, frequency by year

- Academic Scope: OLS, FEM, REM, PLS model

1.4 Methodology

This study approaches quantitative research with support from Stata 17.0software to provide empirical evidence on the correlation between Financialdevelopment, Geopolitical risk, Natural resource rents, Eco-innovation, Economicgrowth and Sustainable development Our group employed panel data with 726observations collected from 25 countries around the world between 1990 - 2020 Withthe results given by the software, we begin to analyze and make appropriatesuggestions Furthermore, to make statistical inference, several models are conductedsuch as Ordinary least squared method (OLS); Fixed-effect model (FEM); Randomeffects model (REM); Feasible general least squares model (FGLS)

Chapter 4 Results and Discussion

Chapter 5 Conclusions and Implications

1.6 Research Process

Figure 1.1: Research process

2.1.2 The ecological modernization theory (eco-innovation and sustainable) development

The ecological modernization theory supports the link between eco-innovationand sustainable development by emphasizing that advancements in environmentaltechnologies are crucial for achieving sustainable development goals According tothis theory, sustainable development can be realized by fostering the creation andapplication of new, environmentally friendly, and resource-efficient technologies andprocesses through eco-innovation This approach can mitigate environmental impacts,enhance economic competitiveness, promote social equity, and improve quality of life.Furthermore, eco-innovation can aid in conserving biodiversity by encouragingsustainable land use practices and reducing the impact of human activities on naturalecosystems

2.1.3 The resource curse theory

The resource curse theory supports that nations abundant in natural resources,such as oil, gas, and minerals, tend to experience slower economic growth anddevelopment compared to resource-poor countries (Ross, 1999) This phenomenonoccurs because the concentration of wealth and power associated with natural resourcerevenues (NRR) often leads to increased corruption, unequal resource distribution, and

a lack of economic diversification, all of which can impede sustainable development(Pendergast et al., 2011)

A significant consequence of NRR is the Dutch disease, which severely impacts

a nation's efforts toward sustainable development This condition occurs when aneconomy becomes overly reliant on a specific natural resource, leading to the neglect

of other sectors like manufacturing and agriculture Such dependence can reduce thecompetitiveness of these alternative industries, ultimately causing them to shrink orcollapse (Ben-Salha et al., 2021)

2.2 Literature review

Table 2.1 Summary of relevant research papers

development: Doesgeopolitical riskmatter?

26 OECDcountries(Australia,Austria,Belgium,Canada,CzechRepublic,Denmark,Finland,France,Germany,Hungary,Ireland, Italy,Japan, SouthKorea,

1990 2019

-CommonCorrelatedEffects MeanGroup

- Sustainable development benefits from geopolitical risk management

- The goal of policy is to lower the geopolitical risk associated withsustainable development

→ These results imply that, in order to achieve sustainabledevelopment while reducing the adverse effects of natural resourcerents, OECD nations should give financial development andeco-innovation policies top priority Since geopolitical risk has thepotential to undermine sustainable development, policymakers ought

to encourage global collaboration and risk-sharing

Zealand,Norway,Poland,Portugal,Spain,Sweden,Switzerland,Turkey, theUnitedKingdom,and UnitedStates)Rong Fu,

Jianmei Liu

Revenue sources ofnatural resourcesrents and its impact

on sustainable

-2020

Fully-ModifiedOrdinary LeastSquare,

Evidence from

global data

Ordinary LeastSquare, andCanonicalCointegrationRegression

- Long-run estimates are calculated using parametric regressiontechniques

- The impact of natural resources on global sustainable development isuneven

- Sustainable development is facilitated by energy productivity

→ Based on the empirical findings, this research makes policyrecommendations for the enhancement of energy productivity, thesustainable use of natural resource rents, and investments inenvironmentally related technological innovation

1990 2020

-Panel quantileregression(PQR)

- Environmental quality is negatively impacted by geopolitical risk

- Asian nations have a load capacity curve

- Use of renewable energy enhances the quality of the environment

→ Additionally, our research demonstrates that while financialdevelopment and renewable energy sources (REC) improveenvironmental quality, geopolitical risk lowers it This study proposes

a comprehensive policy approach based on the empirical findings toaccomplish SDG 13 (climate change) targets

sustainabledevelopment goals?

Evidence from apanel analysis

41 countries 2015

-2021

Two-way FixedEffect Model

- Tensions in geopolitics impede the advancement of sustainabledevelopment

- Decent Work and Economic Growth and Climate Action are the twodimensions that are impacted

- Only nations that rely heavily on natural resources are impacted

- The effects of geopolitical risks may be mitigated by improvements

in institutional quality

→ Nations that rely heavily on natural resources are the only oneswhere geopolitical risks have a negative impact More significantly,gains in institutional quality may be able to somewhat mitigate thenegative impact that geopolitical risks have on the objectives ofsustainable development As a result, this research has significantpolicy implications for those formulating strategies to sustain theSDGs' advancement in the face of growing global unpredictability.Qiang

Top 10countries bythe numberof

publications

1992 2023

-Co-citationanalysis,Clusteringalgorithms

- Globally, a great deal of research has been done on the relationshipbetween geopolitical risk and sustainable development

- Geopolitics has an impact on international cooperation; this isespecially evident in the cooperation between Russia and Ukraine

- One important function of international organizations is to supply

linkage betweengeopolitical risk andsustainable

developmentresearch

→ Developed nations have produced a greater number of publications

in this area The dynamics of international collaboration have changedover time, revealing differences in author and country collaborationpatterns before and after the Russia-Ukraine conflict, a decline incountry collaboration clustering, and China's emergence as the nationwith the highest level of collaboration following the conflict Authorcollaboration networks also demonstrate a dearth of influential authorgroups in the field The results of theme clustering show howgeopolitical risks have affected environmental, social, and economicsustainability

07 emergingcountries(Brazil,China, India,

1990 2018

-EnvironmentalKuznets Curve(EKC)

- The relationship between CO2, renewable energy, and naturalresources is examined

- Both aggregated and disaggregated country risks are considered

- CO2 emissions are increased by natural resources

Indonesia,Mexico,Russia, andTurkey)

- Improving the switch to green energy reduces CO2 emissions

- Mitigating CO2 by lowering aggregated and disaggregated countryrisks

→ CO2 emissions may be impacted by shifts in energy sources andnatural resource availability Country risk contributes to energytransition as well In light of these findings, comprehensive policiespertaining to natural resources and the environment are aimed atachieving environmental sustainability

Munir

Ahmad,

Yiyun Wu

Combined role ofgreen productivitygrowth, economicglobalization, andeco-innovation inachieving ecologicalsustainability forOECD economies

20Organizationfor EconomicCo-operationand

Development(OECD)countries

1990 2017

-Cross-sectionaldependence(CSD), CSDaugmentedIm-Pesaran-Shin(CIPS), CSDaugmentedDicky-Fuller(CADF), Panelquantile

Zhuolun Li Do geopolitical risk,

green finance, andthe rule of law affectthe sustainableenvironment inChina? Findingsfrom the BARDLapproach

-2020

BARDLapproach,

Koirala,

Gyan

Pradhan

Determinants ofsustainabledevelopment:

Evidence from 12Asian countries

12 Asiancountries

1990 –2014

Fixed EffectsModel (FEM),Random EffectsModel (REM)

These findings show that per capita income and financial developmenthave a positive and significant impact on sustainable development,while time, natural resource rent, and inflation rate have a negative andsignificant impact The findings imply that sustainable developmentrequires the preservation of an appropriate balance of natural

al footprint nexus:

Does naturalresources rentsdiversification make

a difference?

31 OECDnations(Australia,Austria,Belgium,Canada,Poland,Portugal,Chile, CzechRepublic,Germany,Greece,Hungary,France,Ireland,Israel, Italy,UnitedKingdom,

2009 –2019

STIRPAT model - Examine how ecological footprint is affected by the diversity of

natural resource rents, natural resource rents, and environmentaltechnology

- Machado and Santos Silva (2019) proposed the method of momentsfor quantile regression, and the sample consists of OECD countriesfrom 2009 to 2019

- Diversification of resources degrades the environment and weakensthe link between natural resource rents and ecological footprint

- Technology pertaining to the environment has a positive effect onenvironmental quality

→ The increasing the range of natural resource exploitation willincrease the detrimental impacts of resource exploitation on the quality

of the environment Moreover, the level of environmental technologyhas a positive effect on environmental quality at different levels ofquality In light of the ongoing industrial revolution, our findingsprovide a number of perceptive policies for the management of naturalresources

Yiling Yu Role of Natural

resources rent oneconomic growth:

Fresh empiricalinsight from selecteddeveloping

economies

Developingcountries(India,Pakistan,Maldives,Vietnam,Bhutan,Afghanistan,and SriLanka)

1990 2020

-DataEnvelopmentAnalysis (DEA)

- The study of economic growth and the rent from natural resources

- The nonlinear cointegration of variables is supported by the empiricalresults

- Asymmetric in the long run is demonstrated by certain Asian nations

- Bhutan and the Maldives exhibit an asymmetric effect in the shortterm

→ Long-run asymmetric effect data supporting the "resource curse"phenomenon in these countries indicate that total natural resource renthas a negative impact on economic development in Afghanistan, SriLanka, and Nepal Nonetheless, we found that rent from naturalresources positively impacted economic growth in Pakistan and India,indicating that these countries benefit economically from their naturalresources While Bhutan and the Maldives exhibit a short-termasymmetric effect, Vietnam and Sri Lanka demonstrate a long-termasymmetric impact between the total natural resource rent andeconomic development There are various useful policy implications ofthese empirical findings

Jorge dos

Santos

The traditionalenergy-growth

20 Europeancountries

1995 2014

-Fixed EffectVector

- The relationship between energy use, economic growth, andsustainable development is the main topic of this essay

(Austria,Belgium,CzechRepublic,Denmark,Finland,France,Germany,Greece,Hungary,Ireland, Italy,the

Netherlands,Norway,Poland,Portugal,Spain,Slovakia,Sweden,

Decomposition(FEVD),Ordinary LeastSquares (OLS)

- It contrasts the approaches of economic growth (GDP) andsustainable development (ISEW)

- From 1995 to 2014, a panel of 20 European nations with annual datafrequency was examined

- The outcomes obtained with the ISEW on the nexus differsignificantly from those obtained with the conventional GDP

- GDP-focused policies were unable to have the desired impact onsustainable development

→ The findings point to a conservative theory for economic growthwith energy consumption as well as a new negative feedbackhypothesis for the alternative measure of development This study alsodiscovers a number of additional impacts that economic growthfactors, including terms-of-trade and rents from natural resources, have

on sustainable development These findings suggest that policy makersaiming to achieve increased sustainable development havemisinterpreted the economic growth approach, which has beenextensively studied using GDP

Switzerlandand theUnitedKingdom)Muhamma

-2018

Dickey-FullerGeneral LeastSquares(DF-GLS)

- The factors influencing China's CO2 emissions after COP21 areinvestigated in this study

- Wavelet coherence and Bayer-Hanck cointegration techniques areused in this work

- Over time, innovation and transportation both greatly increase CO2emissions

- The relationship between CO2 emissions and financial development

is inverse

→ At various time periods and frequencies, the results of a waveletpower spectrum show that there is a substantial vulnerability infinancial development, transportation infrastructure, innovation, andCO2 emissions Moreover, the wavelet coherence approach resultsshow that: (i) innovation is found to be a significant predictor of CO2emissions during the 2007–2013 period; (ii) CO2 emissions andfinancial development have negative long-term correlations; and (iii)

transportation significantly contributes to CO2 emissions between2000–2015 and 1985–1989 Our research has important policyramifications because it indicates that in order to meet environmentalsustainability goals, innovation and transport infrastructure must bestrengthened.

2.3 Hypothesis

2.3.1 Financial development and sustainable development

Financial development (FD) and sustainable development are two interrelatedconcepts essential for the growth and prosperity of any economy Jalilian andKirkpatrick (2005) found that FD can enhance economic growth and reduce poverty,which is essential to sustainable development They assert that a proficient financialsystem can gather and deploy savings efficiently, ultimately resulting in increasedlevels of economic growth and investment Cao et al (2021) found that FDsignificantly boosts green growth by funding green projects and incentivizing theadoption of green technologies They underlined that long-term sustainabledevelopment can be achieved by a variety of strategies, including limiting the extent offinancial institution expansion while confiscating governmental privileges,encouraging capital market growth, and boosting the integration of FD withtechnology progress

Using a panel of sixteen low-income economies, Bist (2018) examines thenexus between financial development, economic growth, and social sustainability andfound a positive relationship between social progress, financial development, andeconomic growth Similarly, Donelli and Chiriatti (2017) look at the BRICS (Brazil,Russia, India, China, and South Africa) countries, and Bayar (2014) finds positiveeffects of financial development on economic growth in emerging countries Ozturkand Acaravci (2013) state that environmental performance can be enhanced throughfinancial development because it enables industries to access advancedenvironmentally friendly technology Similarly, Ahmed (2017) investigates theinfluence of financial development on renewable energy production and finds apositive relationship between financial development and renewable energy production.The study concludes that renewable energy production is very expensive; so, financialprogress enables a country to produce renewable energy sources that are lesssignificant contributors to environmental deterioration

However, in another study, Cao et al (2022) used the spatial Durbin model inChina They concluded that the development level of a financial institution in a

Conversely, it has a notably positive influence on the green growth of neighboringprovinces Moreover, the size of the stock market has a significant favorable effect ongreen growth in various provinces Ngo et al (2022) identified a bidirectionalrelationship between financial development and green growth in 36 countries,highlighting that financing strategies for sustainable infrastructure are crucial forachieving the Sustainable Development Goals (SDGs) within the UN's 2030 agendafor sustainable development Deng et al (2023) examined the impact of financialdevelopment on green growth in highly polluted nations, specifically India, Russia,Japan, China, and the USA Their findings indicate that the efficiency of financialmarkets promotes green growth in China and Russia, while it hinders green growth inthe USA, Japan, and India Conversely, the efficiency of financial institutionssignificantly enhances green development in Japan, China, and the USA, butnegatively affects green growth in Russia and India Yang and Ni (2022) revealed thatfinancial development has a detrimental impact on green development in Belt andRoad nations.

In this research paper, the authors will examine the connection betweenfinancial development and sustainable development, anticipating that financialdevelopment will contribute to the enhancement of sustainable development

H1: Financial development has positive impact on sustainable development

2.3.2 Natural resource rents and sustainable development

Natural resources are a form of capital that significantly contribute to economicdevelopment Lots of theoretical and empirical research has been undertaken regardingthe impact of NRR on sustainable development Depending on institutional quality andevaluations of natural resources, resource rents play a significant impact in economicdevelopment (Abdulahi et al., 2019; Epo and Nochi Faha, 2020; Haseeb et al., 2021).Additionally, different types of natural resources have distinct impacts on economicdevelopment For instance, Huang et al (2020) examined the effects of forest rents,mineral resources rents, and oil rents on the economic growth of developing Asianeconomies, finding a positive but insignificant influence of natural resource rents on

management of natural resources can foster green development Conversely, Yu (2023)shows that overall natural resource rents have a detrimental effect on economicdevelopment in Afghanistan, Nepal, and Sri Lanka, supporting the resource cursephenomenon in these three nations Based on the result of that study, we give thehypothesis below.

H2: Natural resource rent has positive impact on sustainable development

2.3.3 Geopolitical risk and sustainable development

In recent years, geopolitical events have attracted significant attention fromscientists worldwide due to their important and far-reaching effects on global stability,economic development, and environmental sustainability As globalization progressesand the interdependence of national economies and trade deepens, maintaining a stableand peaceful international environment is becoming ever more critical for the growthand development of the global economy Under globalization, the occurrence ofgeopolitical events affects national trade economies, especially with the introduction ofthe Sustainable Development Goals It has been demonstrated that geopolitical risksobstruct the attainment of the SDGs in the context of expediting progress towards theirrealization (Nguyen et al., 2023) Previous research has found the relationship betweengeopolitical risk and sustainable development, particularly concentrating on theinfluence of geopolitical risk on GDP and environmental sustainability When acountry's geopolitical risk index rises, the government often boosts capital spending inareas like defense or infrastructure, potentially boosting GDP (Cao et al.,2023)employed fully modified ordinary least squares (FMOLS) and dynamic ordinary leastsquares (DOLS) to examine how resource rents, financial development, andgeopolitical risk impact financial security in BRICS nations Their findings supportedthe notion that geopolitical risk contributes positively to economic development (Cao

et al., 2023) On the other hand, Cheng et al (2018) found a noteworthy negativeimpact of international geopolitical risk shocks on the GDP of 38 developingeconomies In a similar vein, Akadiri et al (2020) discerned a unidirectional causallink from geopolitical risk to economic development specifically within the context of