Financing the green shift: the role of financial inclusion and policy stringency in OECD energy transition

The transition toward sustainable energysystems has become a global priority, especiallyamong OECD countries that account for a signifi-cant share of global emissions. This study examineshow financial inclusion influences the pace of energytransition within these economies and examines howenvironmental policy stringency and global uncer -tainty conditions this relationship. Using panel datafor 20 OECD countries from 2004 to 2023, the studyapplies fully modified and dynamic ordinary leastsquares estimators as well as the two-step SystemGeneralized Method of Moments to address poten-tial endogeneity and heterogeneity. The results revealthat financial inclusion significantly promotes energytransition by facilitating access to capital for renew-able energy investment and efficiency improvements.Moreover, stringent environmental policies enhancethis positive relationship, while higher global uncer-tainty weakens it by discouraging long-term greeninvestment. These findings highlight the importanceof combining inclusive financial systems with con-sistent environmental regulation to accelerate the shifttoward low-carbon energy in advanced economies.The study provides policy insights for governmentsand financial institutions to design instruments suchas green bonds, de-risking mechanisms, and targetedfinancial inclusion strategies that foster sustainableenergy transformation and climate resilience.