ESG, Financial Inclusion, Globalization, and Financial Stability: A Case of BRICS-T Economies

Abstract

This study explores the impact of Environmental, Social, and Governance (ESG) practices, financial inclusion, and globalization on financial stability across BRICS-T economies (Brazil, Russia, India, China, South Africa, Iran, Egypt, Ethiopia, and the United Arab Emirates) over the period 2000–2024. As these emerging economies deepen their integration into the global financial architecture, identifying the drivers of financial stability becomes crucial for policymakers, investors, and regulatory authorities. Employing a panel data framework, the study utilizes Panel-Corrected Standard Errors (PCSE) regression and Principal Component Analysis (PCA) to examine both the individual and combined effects of ESG performance, financial inclusion, and globalization on financial system stability. The empirical findings indicate that ESG practices and financial inclusion have a significant and positive impact on enhancing financial stability.  Globalization also demonstrates a positive influence, albeit with varying effects depending on domestic institutional and regulatory conditions. A series of robustness tests confirms the reliability and consistency of the core results. This research contributes to the existing literature by providing novel empirical evidence on the synergistic roles of sustainability, inclusiveness, and global integration in shaping financial stability in emerging markets. The findings offer valuable policy implications for strengthening financial resilience and promoting sustainable economic growth across the BRICS-T region.