Synthesizing eco-efficiency within EU's inclusive finance: Do environmental policy stringency and renewable energy make a difference?

Abstract

The European Union (EU) is at the forefront of policy initiatives to address worsening environmental challenges of the 21st century. Although the EU is a financially developed zone, it is still unclear if inclusive finance enhances better eco-efficiency given the economic growth drive of the continent that has triggered high eco-intensity with the resultant historical anthropogenic emissions. Hence, the incessant calls for environmental policy initiatives to tackle climate challenges. Hence, we scrutinize whether environmental policy stringency (ENI) makes difference in attaining climate goals while examining the connectedness of inclusive finance and eco-efficiency among 14 EU countries. Deploying method of Moments Quantile Regression in data analysis facilitated the incorporation of renewable energy, reliance on natural resources, and demographic factor. We observed that inclusive finance does not necessarily curtail worsening eco-intensity if ENI is absent. Essentially, while renewable energy boosts eco-efficiency, natural resources depletion and demographic factor abate EU's eco-efficiency. However, environmental policy stringency positively moderates the undesirable ecological impacts of inclusive finance in the EU. Hence, while it's recommended to keep the momentum on renewable energy investments, the EU needs to continue to leverage environmental policy stringency to curtail the impacts of financial inclusivity on the bloc's eco-intensity. © 2025 The Authors

Author keywords Eco-efficiency; Environmenta