Promoting environmental sustainability: A policy perspective on hydroelectric power generation, foreign direct investments, and financial development

In today's rapidly evolving world, characterized by the menace of global warming and the ever-pressing call for sustainable energy solutions, the trilogy of hydroelectric power generation, foreign direct investment, and environmental quality is a compelling and indispensable dimension; all of which necessitate simultaneous consideration. In this quest, this research article aims to explore the nexus between hydroelectric power generation, foreign direct investment, and sustainability—within the framework of financial development. To this end, we have utilized annual data of the world's ten largest hydroelectric power-generating countries in the year 2021 for the period 1992–2019, and utilize the Westerlund-Edgerton LM Bootstrap, Augmented Mean Group, and Dumitrescu-Hurlin panel bootstrap causality methods as our main econometrics' batteries. Based on the empirical outcomes that study entails that financial development, foreign direct investments, and increasing economic growth reduce the environmental quality. We observed that hydroelectric power generation is an important driving force on environmental quality. The empirical outcomes further infer that as the financial development levels of countries increase, the positive impact of hydroelectric power generation on environmental quality becomes more significant. The study findings will help policymakers to organize environmental quality strategies that are more realistic and accurate.