Towards environmental sustainability: Do financial risk and external conflicts matter?

The progress on Sustainable Development Goals (SDGs) needs constant updating and deepening to improve the design of pro-environmental policies. In this context, recent studies report various drivers of ecological footprint (EF) for better climate control; however, the impacts of financial risk (FNR) and external conflicts (EXF) on EF are not thoroughly investigated. Therefore, this research uncovers the role of financial risk and external conflicts in EF using the Environmental Kuznets Curve (EKC) based model. To this end, some advanced time series methods including the Augmented ARDL (AARDL) and Spectral causality tests are applied for the period from 1984 to 2017 in the context of India. The empirical estimates revealed cointegration among variables of the study. The findings uncovered that reducing financial risk mitigates EF levels and stimulates environmental quality. However, limiting external conflicts does not improve the quality of the environment because the EF levels expand due to a reduction in conflicts. The empirical evidence validated the EKC accounting for both financial risks and external conflicts. Population density is found to alleviate environmental deterioration. Moreover, external conflicts and financial risks Granger cause EF. Lastly, policies are directed to limit the financial risk for reducing the EF.