Abstract

The current generation is dealing with the greatest effects of global warming, which are much more severe than those visible during the pre-industrial era. To stop further ecological destruction, nations are making great efforts to develop a sustainable environment in the future decades, specifically by 2050. The most recent climate summit, COP26, which provides a road map for achieving environmental sustainability, was prompted by this difficult goal and brought nations together. The current paper aims to investigate how eco-finance affects COP2 targets in ASEAN countries between 2000 and 2020 considering the COP26 resolution. The study evaluates the effect of eco-finance on carbon dioxide (CO2) emissions and the transition to renewable energy in ASEAN nations. Cross-Sectional Autoregressive Distributed Lag Model (CS-ARDL), an advanced second-generation panel estimation technique, is used for both the long-run and short-run estimation due to the presence of cross-sectional dependency and heterogeneity. The study's conclusions show that eco-finance harms CO2 emissions but has a favourable impact on energy transition, which can assist ASEAN nations in upholding COP26 resolutions. The policymakers of the chosen economies are encouraged to encourage the financial industry to embrace eco-financing strategies to achieve long-term environmental sustainability based on the findings.