This research adopts a model that has been developed around the Ecological Modernization and Resource Bless/Curse theories to offer practical insights on environmental sustainability. Data from 28 selected Caribbean and Latin American economies (grouped into 11 Small Island and Developing States (SIDSs) and 17 Large Continental Economies (LCEs)) for the period 2004 to 2024 is utilized in the analysis. ‘Method of Moments’ quantile regression and the two-stage least squares technique are employed for robust direct findings, while path analysis—a subset of structural equation modelling—is employed to examine the mediation and moderation relationships. Key findings shows that renewable energy is the key driver of sustainability in all Caribbean and Latin American economies regardless of the economy type. Consequently, digitalization and trade openness worsens environmental problems in the SIDSs. However, in the LCEs, digitalization advances sustainability up to a certain threshold, after which it becomes ineffective. Trade openness also tends to present a weak drive to sustainability in the LCEs. Green finance improves sustainability symmetrically in the SIDSs and asymmetrically in the LCEs as it only advances sustainability in highly environmentally stressed LCEs. The meditation role of green finance is significant in the SIDSs and insignificant in the LCEs, while the moderating role of institutional quality is insignificant in all Caribbean and Latin American economies. This study recommends channeling resources for supporting the development of green financial mechanisms for sustainable environments. Policy reforms that align economic efforts in advancing environmental sustainability can be adopted.
Afshar et al. (Mon,) studied this question.