Financial Sector Development, Institutional Quality and Environmental Degradation in Namibia

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Like many African countries, Namibia is severely affected by environmental degradation, compounded by an arid and low-income country in sub-Saharan Africa with 16 percent land covered by desert. Therefore, understanding the dynamics between financial development, institutional quality, and environmental quality. Methods This study assess the influence of financial development and institutional quality on environmental quality in Namibia, using time series data between 1990 and 2023. The study used ARDL approach to examine the short and long run relationship. Results The findings show that institutional quality reduces environmental degradation, aligning with the notion that climate change is not a result of only economic activities, but can be averted by the quality of institutions. However, financial sector development often supports novel and sophisticated investment products and preserves the environment. Conclusion Therefore, this study recommended that Namibia make collaborative efforts to implement effective regulations to strengthen the role of institutions and support financial innovation to address environmental degradation. Encouragement of environmental, societal, and governance (ESG) led to business investments. " } { "@context": "http://schema.org", "@type": "BreadcrumbList", "itemListElement": [ { "@type": "ListItem", "position": "1", "item": { "@id": "https://f1000research.com/", "name": "Home" } }, { "@type": "ListItem", "position": "2", "item": { "@id": "https://f1000research.com/browse/articles", "name": "Browse" } }, { "@type": "ListItem", "position": "3", "item": { "@id": "https://f1000research.com/articles/14-781/v1", "name": "Financial Sector Development, Institutional Quality and Environmental..." } } ] } Home Browse Financial Sector Development, Institutional Quality and Environmental... ALL Metrics - Views Downloads Get PDF Get XML Cite How to cite this article Fikunawa B and MISHI S. Financial Sector Development, Institutional Quality and Environmental Degradation in Namibia [version 1; peer review: 1 approved with reservations] . F1000Research 2025, 14 :781 ( https://doi.org/10.12688/f1000research.166902.1 ) NOTE: If applicable, it is important to ensure the information in square brackets after the title is included in all citations of this article. Close Copy Citation Details Export Export Citation Sciwheel EndNote Ref. Manager Bibtex ProCite Sente EXPORT Select a format first Track Share ▬ ✚ Research Article Financial Sector Development, Institutional Quality and Environmental Degradation in Namibia [version 1; peer review: 1 approved with reservations] Brigitte Fikunawa https://orcid.org/0009-0003-0073-7643 1 , SYDEN MISHI 1 Brigitte Fikunawa https://orcid.org/0009-0003-0073-7643 1 , SYDEN MISHI 1 PUBLISHED 11 Aug 2025 Author details Author details 1 Business and Economic Science, Nelson Mandela University, Port Elizabeth, Eastern Cape, South Africa Brigitte Fikunawa Roles: Conceptualization, Data Curation, Formal Analysis, Investigation, Methodology, Project Administration, Software, Validation, Visualization, Writing – Original Draft Preparation SYDEN MISHI Roles: Supervision, Writing – Review & Editing OPEN PEER REVIEW DETAILS REVIEWER STATUS Abstract Background Environmental degradation, which is the deterioration of ecological quality due to increased unsustainable economic activities, is a global concern that poses a threat to humanity. Like many African countries, Namibia is severely affected by environmental degradation, compounded by an arid and low-income country in sub-Saharan Africa with 16 percent land covered by desert. Therefore, understanding the dynamics between financial development, institutional quality, and environmental quality. Methods This study assess the influence of financial development and institutional quality on environmental quality in Namibia, using time series data between 1990 and 2023. The study used ARDL approach to examine the short and long run relationship. Results The findings show that institutional quality reduces environmental degradation, aligning with the notion that climate change is not a result of only economic activities, but can be averted by the quality of institutions. However, financial sector development often supports novel and sophisticated investment products and preserves the environment. Conclusion Therefore, this study recommended that Namibia make collaborative efforts to implement effective regulations to strengthen the role of institutions and support financial innovation to address environmental degradation. Encouragement of environmental, societal, and governance (ESG) led to business investments. READ ALL READ LESS Keywords environmental degradation, natural resources rent, institutional quality, financial sector development, renewable energy, Climate change, Climate justice Corresponding Author(s) Brigitte Fikunawa ( [email protected] ) Close Corresponding author: Brigitte Fikunawa Competing interests: No competing interests were disclosed. Grant information: The author(s) declared that no grants were involved in supporting this work. Copyright: © 2025 Fikunawa B and MISHI S. This is an open access article distributed under the terms of the Creative Commons Attribution License , which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. How to cite: Fikunawa B and MISHI S. Financial Sector Development, Institutional Quality and Environmental Degradation in Namibia [version 1; peer review: 1 approved with reservations] . F1000Research 2025, 14 :781 ( https://doi.org/10.12688/f1000research.166902.1 ) First published: 11 Aug 2025, 14 :781 ( https://doi.org/10.12688/f1000research.166902.1 ) Latest published: 06 Oct 2025, 14 :781 ( https://doi.org/10.12688/f1000research.166902.2 )  There is a newer version of this article available. Suppress this message for one day. 1. Introduction Environmental degradation as a result of climate change is at the forefront of policy discussions at the academic, scientific, and policy levels, as the impact of economic activities, especially land use and transportation, on climate change has reached unprecedented levels ( IPCC, 2019 ). As such, the quality of the environment reflects the extent to which increased economic activities, especially dependence on natural resources and unsustainable energy sources, inflict danger to the environment ( Amer et al., 2024 ). Ngarava (2021) argued that increased economic activity is a threat to environmental sustainability. For low-income countries, characterized by high levels of poverty, inequality, and unemployment, there is a need to accelerate economic growth. However, with limited systems and technology adoption for production, storage, transportation, and waste disposal, there is a threat to the environment ( Hunjra et al. , 2024 ). Namibia, like many developing countries, has the least carbon emissions, yet is heavily impacted by climate change as a country with over 90% of it classified as hyper-arid, arid, or semi-arid, ranking second to the Sahara Desert in terms of aridity ( World Bank Group, 2021 ). As a result, communities are prone to catastrophic events such as increased temperature, drought, and floods ( World Bank Group, 2021 ; Government of the Republic of Namibia, 2023 ). As a result, Namibia faces immense pressure to control its ecological footprint, especially in terms of land use, which is the highest emitter of greenhouse gases in the country. Economic activities such as exploration of natural resources are the highest contributor to land use and contribute 14.4% to GDP, more than 50% to export earnings, and 55.9% to government revenue ( Bank of Namibia, 2023 ; Chamber of Mines of Namibia, 2024 ). Therefore, although these resources are crucial for socioeconomic development, dependence on land-use activities has a consequential impact on the environment. Propelling growth through the extractive primary sector strains the environment ( Aladejare, 2022 ). As such, increased economic activities, such as the use of fossil fuels, exploration, and industrialization, contribute to global warming and environmental degradation ( Gutti, Aji and Magaji, 2012 ; Amer et al. , 2024 ). This has prompted policymakers and governments to encourage sustainable land use management to protect the environment. Although resource rent and other economic activities are beneficial to the economy, they also pose a threat to the environment ( Sadaoui et al. , 2024 ). In addition, the financial sector, as an enabling division of the economy with its intermediating role, plays a role in transferring and managing climatic risk; hence, the development of these sectors matters in finding a lasting solution. Environmental degradation is a result of increased economic activities, production, and exploitation of natural resources. However, it is believed not to be a result of capitalism and economic growth alone but also involves the absence of effective institutional frameworks and policies to deal with greenhouse gas emissions and climate change ( Cohen, 2023 ). Thus, there are calls for institutional frameworks to address the global emission levels of greenhouse gases. According to Hussain and Dogan (2021) ; Warsame et al. , (2022) increased governance, an indication of institutional quality plays an important role in environmental sustainability. Song et al. , (2024) emphasized that environmental quality can be preserved through the implementation of stringent environmental policies that reduce the use of non-renewable energy sources that burden the environment. In the Namibian context, various laws have been implemented to avert environmental degradation, such as Article 95 of Namibia’s Constitution, Environmental Management Act 7 of 2007, the National Policy and Strategy on Climate Change 2011, and the Environmental Assessment Policy 1994. These policies were implemented to ensure sustainable environmental management and the mitigation of environmental degradation. The advocacy for investment in green energy and technology to avert environmental degradation has been at the forefront of climate change talks at the United Nations Convention Conferences and Paris Agreement negotiations. Therefore, financial development is critical for investments in projects and technologies that preserve the environment ( Imran et al. , 2023 ; Gul and Hussain, 2024 ). This Kirikkaleli and Adebayo (2021) indicates that financial development is crucial for environmental sustainability, as it allows for a shift from traditional to more modern and sustainable practices. Given the importance of investment in clean energy, technology, and low-carbon development, Namibia has implemented initiatives such as the 2016 Green Climate Fund (GCF) through the Environmental Investment Fund established under Act 13 of 2001. The GCF has a portfolio of $ 640 million secured for grant and readiness support by 2023. These funds aim to finance climate change mitigation programs that allow for overall economic development and environmental protection. While the literature acknowledges the impact of production and consumption on the environment, current views show that additional factors are responsible for climate change and environmental degradation. Despite the importance of environmental sustainability to our livelihoods, there is a lack of consensus on the influence of policies and finance on the environment. This study investigates the impact of financial sector development and institutional policies on environmental degradation in developing countries. finance and policies in developing countries, which are known to be dependent on developed economies for climate financing and have weak policies. Insight into the effectiveness of institutional frameworks and financing in dealing with climate change and its influence on environmental degradation provides guidelines for a holistic and comprehensive approach to create synergies between different variables to enhance environmental quality and sustainability. The rest of the paper is structured as follows: Section 2 presents the literature review, Section 3 discusses the data and methods, and Section 4 presents the empirical results. Question 5 presents the conclusions and recommendations. 2. Related literature review The treadmill of production theory highlights the relationship between increased economic activity, natural resource demand, and the environment ( Schnaiberg, Pellow and Weinberg, 2002 ; Islam and Hossain, 2015 ). This suggests that the constant pursuit of economic growth and profit by countries creates an environment in which the economy seeks constant expansion without considering the impact on the environment ( Islam and Hossain, 2015 ; Lewis, 2019 ). Thus, environmental degradation is due to the direct production demand of state organs, political actors, and the private sector ( Curran, 2017 ; Lewis, 2019 ). This further explains that the expansion of economic activities leads the private sector to push for profit, which leads to the use of machinery to replace labor, leading to increased energy consumption and an increase in ecological harm while decreasing social benefits ( Schnaiberg, Pellow and Weinberg, 2002 ; Islam and Hossain, 2015 ). In addition, the drive for economic development leads to the increased exploitation of natural resources, waste production, and environmental pollution ( Lewis, 2019 ). Thus, to deal with social problems, the treadmill must increase its capacity and further deepen environmental problems. Therefore, the social and environmental benefits are inseparable. Environmental Kuznets Curve is another prominent theory that explains the relationship between economic activities and the environment ( Leal and Marques, 2022 ). This explains how the economy affects environmental sustainability at different stages of growth. The theory explains that as economic activities increase in the early stages of economic development, there is an increase in waste emissions, which harm the environment ( Stern, 2014 ; Sajeev and Kaur, 2020 ). This harm to the environment is due to the rate of production and lack of sustainable practices for waste reduction and management. As the composition of the economy changes from the primary sector and industrialization to the service sector, pollution levels remain stagnant and decline over time ( Sajeev and Kaur, 2020 ; Leal and Marques, 2022 ). Furthermore, with the implementation of environmental policies or institutional frameworks, the use of clean energy and technology, and improved waste management, environmental pressure declines and sustainability improves ( Stern, 2014 ; Zuo et al. , 2022 ). Therefore, the scale effect had a negative influence on the environment at the beginning of industrialization. Thereafter, as changes in the composition and introduction of technology have a positive influence on the environment, there has been an improvement in environmental quality ( Sajeev and Kaur, 2020 ; Zuo et al. , 2022 ). 2.1 Empirical literature review Environmental sustainability and achievement of SDG, including the role of institutional quality and financial development, have been at the center of discussion at academic and policy levels, with empirical studies giving opposing views. Akpan and Kama (2024) carried out a panel analysis of high- and low-income economies and found that countries with strong institutions tend to reduce environmental degradation by prohibiting fossil fuel consumption, whereas those with weak institutions worsen the situation. In BRICS-T economies, Hussain and Dogan (2021) ; Song et al. , (2024) stringent environmental policies and institutional quality can effectively reduce their ecological footprint. Assessing whether innovation and institutional quality can contribute to SDGs in emerging economies (E7), Anwar et al. , (2021) ; Anwar, Malik and Ahmad (2022) institutional quality and innovation impedes CO2 emissions, thus enhancing environmental quality. Furthermore, studies such as Ali et al., (2019) ; Udemba (2021) ; Xaisongkham and Liu (2024) reported similar findings that institutional quality and good governance are crucial for environmental sustainability. In developing economies, Xaisongkham and Liu (2024) institutional quality, especially government effectiveness, promotes environmental quality. In contrast, Sibanda et al. , (2023) combined institutional quality and natural resource rent in sub-Saharan Africa found that institutional quality increases environmental degradation due to weak institutions. Aydin, Sogut and Erdem (2024) discovered that institutional quality reduces the ecological footprint in certain countries, such as Austria, while it increases the ecological footprint in countries, such as Germany and France. These findings show that highly industrialized countries, such as Germany, which rely on non-renewable energy sources, tend to contribute to an increased ecological footprint and environmental degradation. SDGs 13 calls for financial sector development or finance accessibility to deal with climate change and environmental degradation. A cross-analysis study Zuo et al. , (2022) found that financial development is detrimental to the environment in low- and high-income countries due to the capacity of funding in developing economies, while developed economies continue to invest in non-renewable energy sources. In middle-income economies, they find that financial development is crucial for environmental sustainability. In sub-Saharan Africa, Habiba and Xinbang (2022) financial sector development in its entirety is detrimental to the environment; however, financial institutions’ development in terms of access, depth, and efficiency contributes to environmental degradation more than financial market development, as the availability of credit can encourage consumption and production using outdated technologies, and also due to a lack of environmental protection regulations. Similarly, Ganda (2022) financial sector development is linked to increased carbon emissions in BRICS countries. Additionally, Tran et al. , (2023) financial development leads to environmental degradation in ASEAN countries. A nonlinear relationship between financial sector development in terms of green financing and environmental degradation was found in China, as Huang and Guo (2023) green financing encourages CO2 emissions in the short run but encourages environmental sustainability in the long run. However, in terms of traditional financial development, it leads to environmental degradation, as funding tends to be channelled to pillar industries with high emissions, other than low-carbon industries (green industries) with low survival rates. However, Raihan (2023) financial development was found to have a negative relationship with environmental deterioration, thus reducing environmental degradation. Usman, Makhdum and Kousar (2021) revealed that financial development contributed to a reduction in environmental degradation and enforced sustainability. Similarly, Kirikkaleli and Adebayo (2021) it was found that financial development, in terms of green financing and credit, enhances environmental quality due to investment in clean energy and technologies. Combining financial development and institutional quality Amin et al. , (2022) found that governance and financial development reduced carbon emissions. In MENA countries, ( Awdeh, 2022 ) it was found that financial development, good governance, and quality institutional systems can mitigate pollution and environmental degradation and that the combination of these factors has a more significant impact on controlling the carbon footprint and achieving environmental sustainability. In contrast, Ahmad et al. , (2022) indicates that financial development is detrimental to the environment, whereas institutional quality reduces carbon emissions and ensures sustainability. However, the joint impact of financial development and institutional quality has a negative effect on carbon emissions, indicating that institutional quality has a moderating effect, reducing the negative impact of financial development as such strong regulations and institutions enable the implementation of regulations on finance for environmental protection and ease green financing and investment. A global analysis Khan, Weili and Khan (2022) found that financial sector development and institutional quality individually contribute to increased carbon emissions; however, the interaction between the two indicates that they can reduce carbon emissions through the facilitation of environmentally friendly projects and green investment. 3. Data and methods This study used time-series data from 1990 to 2023 in Namibia to investigate the impact of institutional quality and financial development on environmental degradation. This study used carbon dioxide (CO 2 ) per capita as a proxy for environmental degradation, as it is the primary contributor to environmental degradation and has been used in different studies ( Sida, 2011 ; Doğan, Saboori and Can, 2019 ; Tran et al. , 2023 ; Gul and Hussain, 2024 ). This study used CO 2 as a proxy for the data constraints of variables, such as the ecological footprint index. The independent variable includes institutional quality (IQ) as a measure of the effectiveness of governance in the country, as strong institutions are important in effective environmental governance Li et al. , (2022) , and credit to the private sector as an indicator of financial sector development (FSD), adopted from studies such as ( Amin et al. , 2022 ; Awdeh, 2022 ; Khan, Weili and Khan, 2022 ). Other explanatory variables included renewable energy consumption (REC), GDP growth, and trade openness (TO). The model used in the study, informed/adapted from, Amin et al. , (2022) and modified, is presented as follows: (1) CO 2 = ( IQ i , t , FSD i , t , TO i , t REC i , t , GDP i , t ) Table 1 presents descriptive statistics of the variables used in this study. The standard deviations for all variables were low, indicating that they were normally distributed. Table 1. Descriptive statistics. Variables CO2 IQ FSD TO REC logGDP Mean 1.347 6.071 45.380 94.434 32.858 8.202 Maxi. 1.812 6.812 60.586 123.762 42.5 8.471 Mini. 0.789 4.423 19.00 76.925 29.2 7.978 Std. Dev. 0.296 0.664 9.381 10.607 3.140 0.174 Obs. 34 32 34 34 31 34 Table 2. Unit root analysis. Augmented Dickey-Fuller Dickey-Fuller Phillips-Perron (PP) Level 1st difference Level 1st difference Level 1st difference CO2 -1.5308 -6.127*** -0.9596 -5.127*** -1.531 -6.120*** logGDP -1.134 -3.840*** -0.674 -3.566*** -1.352 -3.847*** REC -3,462** -1.074 -2.536** -3.572** FSD -4.155** -1.072 -3.419*** -3.438** IQ -3.454** -1.128 -2.777*** -3.134** FDI -1.909 -5.044*** -1.962 -4.333*** -2.092 -5.045*** TO -3.305** -3.382*** -2.109 -3.187** Table 3. ARDL bound results. F-Statistics Value K 19.6874 5 Significance level Lower bound Upper bound 1% 4.134 5.761 5% 2.910 4.193 10% 2.407 3.517 To select suitable estimation techniques for the study, a unit root test was adopted, as economic and financial data are not stable and thus contain outliers. Economic and financial data tend to be non-stationary and can lead to spurious estimations. Therefore, data must be stationary to produce reliable results. In addition, it allows us to choose a suitable estimation approach based on the order of integrations at levels I(0), first difference I(1), or second difference I(2). The study used the Dickey-Fuller, augmented Dickey-Fuller, and Phillips–Perron (P–P) methods. This study used ARDL estimation techniques to examine the relationship between NRR, FSD, IQ, and environmental degradation. ARDL is preferred because it allows the use of a mixed order of integration of either I(0) or I(1). In addition, ARDL is recommended because it reduces the issue of misspecification, spurious, and random errors that can occur because of non-stationary data. Furthermore, ARDL allows for bound tests to assess whether cointegration exists as dependent and independent variables, even when integrated at different orders of integration. To examine the existence of cointegration, this study proposes the following hypothesis: HO : β 1 i = β 2 i = β 3 i = β 4 i = β 5 i = β 6 i = 0 H 1 : β 1 i ≠ β 2 i ≠ β 3 i ≠ β 4 i ≠ β 5 i ≠ β 6 i ≠ 0 Pesaran, Shin and Smith (2001) provides critical values to be tested against the F-statistic. Lower bound I(0) and upper bound I(1). Pesaran, Shin and Smith (2001) indicate that when the F-statistic is below the lower bound, the null hypothesis indicates that no cointegration exists, and when it falls between the upper and lower bounds, the results are inconclusive, as none of the hypotheses are accepted. However, if? The F-statistic is larger than both critical values, and the alternative hypothesis is accepted, which indicates the presence of cointegration ( Emeka and Kelvin, 2016 ). As such, if there is evidence of cointegration (long-run relationship), the ARDL-EC model is used to estimate the long-run. The ARDL model used in the study is specified below: (2) ∆ CO 2 = a 0 + a q t + ∑ i = 1 n β 1 i ∆ CO 2 t − 1 + ∑ i = 1 n β 2 i ∆ IQ t − 1 + ∑ i = 1 n β 3 i ∆ FSD t − 1 + ∑ i = 1 n β 4 i ∆ T 0 t − 1 + ∑ i = 1 n β 5 i ∆ REC t − 1 + ∑ i = 1 n β 6 i ∆ logGDP t − 1 + β 7 CO 2 t − 1 + β 8 IQ t − 1 + β 9 FSD t − 1 + β 10 FDI t − 1 + β 11 TO t − 1 + β 12 REC t − 1 + β 13 logGDP t − 1 + μ ECT t + ε t β 1 − β 13 are short- and long-run parameters, ∆ is the difference operator, ε t is the error term, and ECT is the Error Correction term. Given the dynamics of time-series data that tend to be serially correlated, this study has carried out serial correlation to ensure that the error terms are serially independent. In addition, the model was assessed for normality and if residuals were homoscedastic. To ensure that the model was stable, a stability test was performed using the CUSUM. The stability test is important in time series analysis, as we cannot predict the structural changes that may have occurred. The Ramsey RESETs test was used to assess the model specifications. 4. Empirical results and discussion This section discusses the empirical results, which include unit root, cointegration analysis using ARDL, and presentation and discussion of the results for both the short and long coefficients. It also includes diagnostic tests. 4.1 Unit root tests and bound cointegration Stationarity tests were carried out as presented in Table 2 to ensure that all variables were stationary at either I (0) or I (1), and it was found that all the variables were integrated at either I (0) or I (1), and no variables were integrated at the I(2) order. Therefore, the results satisfy and validate the ARDL criterion, which allows the use of the ARDL estimation approach. Given the unit root test, the study applied the Pesaran et al. (2001) apply the ARDL approach to assess the long-run relationship. The bound test shows that the estimated F-statistics are greater than the lower and upper bounds at a 5% level of significance, indicating the existence of a cointegrating relationship between the dependent and independent variables (see Table 3 ). 4.2 Estimation of long and short-run coefficients With confirmation of the long-run relationship, the study estimated the long and short run. The results presented in Tables 4 and 5 indicate that GDP growth has a positive and statistically significant relationship with environmental degradation in both the long and short terms. This indicates that an increase in economic growth leads to an increase in environmental degradation. The findings are consistent with the treadmill of production theory, which emphasizes that the pursuit of increased economic growth and profit-seeking because of the exploitation of natural resources and others leads to environmental degradation ( Schnaiberg, Pellow and Weinberg, 2002 ; Lewis, 2019 ). In addition, it contradicts the EKC theory, which indicates that in the long run, GDP growth is supposed to contribute to environmental sustainability due to the use of clean energy, environmental legal frameworks, and waste management practices ( Stern, 2014 ; Zuo et al. , 2022 ). This finding supports theories that indicate that as economic agents continue to seek profit, they put more pressure on the environment, thus causing climate change and degradation. The findings further reflect Namibia’s current economic situation, which saw increased investment in explorations of natural resources, oil, and gas, taking precedent over economic activities that are environmentally friendly. Table 4. Long-run coefficients. Variable Coefficient Std. Error t-Statistic Prob. REC -0. 0509 0.0057 -8.8524 0.0000 TO -0.0037 0.0011 -3.1811 0.0021 IQ 0.0355 0.0199 1.7786 0.0875 LOG (GDP) 1.5487 0.0948 16.3366 0.0000 FSD -0.0119 0.0032 -3.9405 0.0006 C -9.1177 0.6824 -13.3601 0.0000 Table 5. Short-run coefficients. Variable Coefficient Std. Error t-Statistic Prob. COINTEQ -0.9260 0.0695 -13.3111 0.0000 D (TO) -0.0005 0.0009 -0.6097 0.5471 DLOG (GDP) 0.8294 0.1752 4.7341 0.0000 D (FSD) -0.0048 0.0023 -2.1282 0.0426 In addition, financial sector development has a negative relationship in both the short and the long run. This implies that increased financial sector development, in terms of credit access by the private sector, can reduce environmental degradation. The availability and accessibility of financial resources can encourage investment in green energy sources and technologies, as suggested in ( Raihan, 2023 ; Usman, Makhdum and Kousar, 2021 ). In addition, financial development is suggested to lower environmental degradation as it can accelerate technological advancement, which can reduce pollution and enhance sustainability ( Amin et al. , 2022 ; Prempeh, 2024 ). As outlined in the literature, the results suggest that a more developed financial sector in Namibia can mitigate environmental degradation through investment in green technologies and energy sources, such as green hydrogen and the introduction of new green financing mechanisms in Caucus farming and solar energy production. Therefore, financial sector development plays a significant role in mitigating carbon emissions and achieving the SDGs in climate action. Moreover, institutional quality is positively related to environmental degradation, suggesting that it exacerbates environmental degradation. In line with the results for the previous period, Sibanda et al. , (2023) the rules and regulations set by governments have not been implemented to reduce environmental degradation. Whereas Aydin, Sogut and Erdem (2024) indicate that Environmental policies only encourage environmental sustainability in countries with investment in clean energy; however, they exacerbate environmental destruction in industrialized economies. In addition, Akpan and Kama (2024) they explained that institutional quality tends to discourage sustainability in countries with weak institutions, especially in developing countries. Therefore, based on the findings, institutional frameworks and institutions in Namibia are not effective tools for reducing the pressure on the environment, leading to reduction degradation and enhancing its quality. Environmental degradation is not only a product of economic activities, but also of the structures and functioning of institutions, which include lack of enforcement, weak regulations, and governance ( Cohen, 2023 ). The results show that the consumption of renewable energy can reduce environmental degradation as it has a negative and statistically significant relationship with environmental degradation in both the long and short run. This implies that an increase in energy consumption from renewable sources leads to a decline in carbon emissions and ecological footprint. However, the relationship was positive in the previous period in the short term. The findings are similar to those for Kirikkaleli and Adebayo (2021) ; Achuo, Miamo and Nchofoung (2022) ; Habiba and Xinbang (2022) the consumption of renewable energy that dampens greenhouse gas emissions, such as reduced environmental degradation. Furthermore, the findings show that increased investment in renewable energy production and initiatives, such as green hydrogen and solar energy, can contribute to environmental sustainability. In terms of trade openness, the relationship with environmental degradation is negative. These results suggest that trade openness can shift cleaner production technologies to Namibia, which enhances environmental sustainability. These results are consistent with those of the ( Karedla, Mishra and Patel, 2021 ; Shakeel and Nobre, 2024 ; Thi, Pham and Nguyen, 2024 ). The ECT is -0.9260, which is less than 1 and negative, indicating the speed at which the dependent variable adjusts to the equilibrium in the long-run relationship with the independent variables. This shows that 92.60 percent of the disequilibrium will be corrected within a year. However, it will take 1.079 years to correct the disequilibrium between the short- and long-run. 4.3 Diagnostic tests The diagnostic tests presented in Table 6 show that there is no serial correlation, and the error terms are homoscedastic. In addition, the model was correctly specified, and the residuals in the models were normally distributed according to the normality test. Furthermore, the stability for the mode is supported by the CUSUM and CUSUM of Squares, as shown in Figures 1 and 2 ; thus, the model is stable, as it remains between the critical limits of 5 percent. Table 6. Diagnostics tests. Test specification Coefficient Decision LM Test 1.0854 (0.3578) No serial correlation exists Brush Pagan 1.3542 (0.2697) No heteroskedasticity exists Ramsey Reset Test 0.0108 (0.9914) The model is correctly specified Jarqa Bera Test 1.4168 (0.2432) Residuals in the model are normally distributed Figure 1. CUSUM. Figure 2. CUSUM of Squares. 5. Conclusion The essence of environmental sustainability and concerns regarding the impact of environmental degradation on humanity prompted the study to investigate Namibia. Namibia, like many developing countries, has the least carbon emissions, yet is heavily impacted by climate change as a country with over 90% of it classified as hyper-arid, arid, or semi-arid, ranking second to the Sahara Desert in terms of aridity ( World Bank Group, 2021 ). As a result, communities are prone to catastrophic events such as increased temperature, drought, and floods ( World Bank Group, 2021 ; Government of the Republic of Namibia, 2023 ). Therefore, this study examined the impact of financial sector development and institutional quality on environmental degradation. The following conclusions and recommendations were drawn: • Institutional quality contributes to environmental degradation, due to the nature and weakness of implemented policies that cannot limit increased emissions of greenhouse gas emissions. While institutional quality negatively influences environmental protection, there is a need to empower institutions to ensure environmental protection. Although countries have implemented policies to deal with climate change, they have not been highly effective; thus, institutional reforms are needed to address environmental degradation issues. Developing countries must ensure that environmental protection is a policy priority to strengthen their environmental legislation. Furthermore, based on the findings developing countries must incorporate financial globalization into environmental protection frameworks to mitigate degradation. Given the impact of institutional quality on the environment, there is a need to link and reform environmental protection and investment policies to attract economic activities that will be beneficial to the environment. • Financial sector development presents a positive impact on the environment. In both the short- and long-run financial development reduces environmental degradation, as such contribute to environmental sustainability. Environmental sustainability relies heavily on access to finance for advanced technologies and means of production. Developing countries are most impacted by climate change; however, they have limited financial capacity. Thus, there is a concerted effort by developing countries to continue to persuade advanced economies to increase climate change financing, as they are the most impacted by environmental degradation. In addition, it is imperative that countries proactively invest in clean energy. This entails that the government, through the central bank, should provide climate loans with special conditions to commercial banks that provide financing for environmentally friendly technologies. Financial accessibility and inflow into clean energy investments are needed to reduce dependence on non-renewable energy. The research, therefore, offers insight and contributes to policy and literature by providing a view on the importance of finance and institutional frameworks in environmental protection and the need to create a balance between economic development and environmental sustainability. The current study focuses on Namibia; however, its implications can be applied to other contexts. Therefore, future studies should incorporate other measures of environmental degradation, such as the ecological footprint or other forms of greenhouse gases. Further studies can apply asymmetric relationships, as the impact may be influenced by changes in a country’s economic or political atmosphere. Ethics and consent statement Ethical approval and consent were not required. Data availability statement The project contains the following underlying data: Mendeley data: FSD & IQ and Environmental degradation. https://data.mendeley.com/datasets/4prx3cr2ss/1 The project contains the following underlying data: Book1.xlsx. Extended data Mendely data: FSD & IQ and Environmental degradation. https://data.mendeley.com/drafts/4prx3cr2ss This project contains the following extended data: SUPPLIMETARY DATA.xlsx Data are available under the terms of the Creative Commons Attribution 4.0 International license (CC-BY 4.0). References Achuo ED, Miamo CW, Nchofoung TN: Energy consumption and environmental sustainability: What lessons for posterity? Energy Rep. 2022; 8 : 12491–12502. Publisher Full Text Ahmad M, et al. : Financial development and environmental degradation: Do human capital and institutional quality make a difference? Gondwana Res. 2022; 105 : 299–310. Publisher Full Text Akpan U, Kama U: Does institutional quality really matter for environmental quality ? 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PubMed Abstract | Publisher Full Text | Free Full Text Comments on this article Comments (0) Version 2 VERSION 2 PUBLISHED 11 Aug 2025 ADD YOUR COMMENT Comment Author details Author details 1 Business and Economic Science, Nelson Mandela University, Port Elizabeth, Eastern Cape, South Africa Brigitte Fikunawa Roles: Conceptualization, Data Curation, Formal Analysis, Investigation, Methodology, Project Administration, Software, Validation, Visualization, Writing – Original Draft Preparation SYDEN MISHI Roles: Supervision, Writing – Review & Editing Competing interests No competing interests were disclosed. Grant information The author(s) declared that no grants were involved in supporting this work. Article Versions (2) version 2 Revised Published: 06 Oct 2025, 14:781 https://doi.org/10.12688/f1000research.166902.2 version 1 Published: 11 Aug 2025, 14:781 https://doi.org/10.12688/f1000research.166902.1 Copyright © 2025 Fikunawa B and MISHI S. 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COPY CITATION DETAILS track receive updates on this article Track an article to receive email alerts on any updates to this article. TRACK THIS ARTICLE Share Open Peer Review Current Reviewer Status: ? Key to Reviewer Statuses VIEW HIDE Approved The paper is scientifically sound in its current form and only minor, if any, improvements are suggested Approved with reservations A number of small changes, sometimes more significant revisions are required to address specific details and improve the papers academic merit. Not approved Fundamental flaws in the paper seriously undermine the findings and conclusions Version 1 VERSION 1 PUBLISHED 11 Aug 2025 Views 0 Cite How to cite this report: Sunde T. Reviewer Report For: Financial Sector Development, Institutional Quality and Environmental Degradation in Namibia [version 1; peer review: 1 approved with reservations] . F1000Research 2025, 14 :781 ( https://doi.org/10.5256/f1000research.183957.r411614 ) The direct URL for this report is: https://f1000research.com/articles/14-781/v1#referee-response-411614 NOTE: it is important to ensure the information in square brackets after the title is included in this citation. Close Copy Citation Details Reviewer Report 23 Sep 2025 Tafirenyika Sunde , North-West University, Potchefstroom, South Africa Approved with Reservations VIEWS 0 https://doi.org/10.5256/f1000research.183957.r411614 Comments and Suggestions · Abstract coherence and completeness Fix grammar and logic: “compounded by an arid and low-income country” → “as an arid, lower-middle-income country.” Align claims with results: abstract says ... Continue reading READ ALL Comments and Suggestions · Abstract coherence and completeness Fix grammar and logic: “compounded by an arid and low-income country” → “as an arid, lower-middle-income country.” Align claims with results: abstract says institutional quality reduces degradation, but results show a positive link. Finish the broken concluding sentence and the ESG line so they read as complete sentences. · Variable and model consistency Define the full regressor set once and use it consistently. You introduce CO₂, IQ, FSD, TO, REC, GDP, but the ARDL equation also includes FDI and an unexplained aqt term. Either drop FDI everywhere or add it to the data, tables, and narrative. Use the same GDP measure throughout: Table 1 uses logGDP, text says “GDP growth.” Fix typos in symbols: TO is written as T0 in the ARDL, and FDIt appears without prior definition. · Statistical claims and tests Remove the incorrect claim that “low standard deviations indicate normality.” Descriptives do not test normality. Clean the unit-root table: replace comma decimals (e.g., −3,462) with points, standardise significance stars, and ensure each series’ integration order is stated once. In the bounds section, fix “if?” and clarify the decision rule text. · Tables, diagnostics, and terminolog y Correct test names: “Brush Pagan” → Breusch-Pagan; “Jarqa Bera” → Jarque-Bera. Ensure Table 4–5 coefficients are interpreted consistently with the narrative; reconcile the IQ sign with the write-up. State exactly what the ECT value implies and avoid mixing “within a year” with “1.079 years” without showing the conversion. · Editing and formatting fixes “Question 5 presents the conclusions” → “Section 5 presents…”. Fix spacing and typos: “Chamber ofMines,” “mode is supported,” “reduction degradation,” space in “$ 640 million.” Ensure section numbering, references, and data links are consistent; avoid linking to Mendeley draft URLs in an indexed manuscript. Is the work clearly and accurately presented and does it cite the current literature? Yes Is the study design appropriate and is the work technically sound? Yes Are sufficient details of methods and analysis provided to allow replication by others? Yes If applicable, is the statistical analysis and its interpretation appropriate? Yes Are all the source data underlying the results available to ensure full reproducibility? No source data required Are the conclusions drawn adequately supported by the results? Yes Competing Interests: No competing interests were disclosed. Reviewer Expertise: Economics, Econometrics, environmental studies and public policy. I confirm that I have read this submission and believe that I have an appropriate level of expertise to confirm that it is of an acceptable scientific standard, however I have significant reservations, as outlined above. Close READ LESS CITE CITE HOW TO CITE THIS REPORT Sunde T. Reviewer Report For: Financial Sector Development, Institutional Quality and Environmental Degradation in Namibia [version 1; peer review: 1 approved with reservations] . F1000Research 2025, 14 :781 ( https://doi.org/10.5256/f1000research.183957.r411614 ) The direct URL for this report is: https://f1000research.com/articles/14-781/v1#referee-response-411614 NOTE: it is important to ensure the information in square brackets after the title is included in all citations of this article. COPY CITATION DETAILS Report a concern Author Response 30 Sep 2025 Brigitte FIkunawa , Business and Economic Science, Nelson Mandela University, Port Elizabeth, South Africa 30 Sep 2025 Author Response 1. The proposed changes in the abstract have been attended to and rectified. 2. All typos have been rectified 3. The variable logGDP had been renamed to GDP to represent ... Continue reading 1. The proposed changes in the abstract have been attended to and rectified. 2. All typos have been rectified 3. The variable logGDP had been renamed to GDP to represent GDP growth, 4. FDI was a typo and redundant. It has been removed from the ARDL equation. 5. The ECM has been rectified and addressed 6. Institutional quality explanation and sign have been aligned. 7. The link for extended data has been rectified with the correct link. 1. The proposed changes in the abstract have been attended to and rectified. 2. All typos have been rectified 3. The variable logGDP had been renamed to GDP to represent GDP growth, 4. FDI was a typo and redundant. It has been removed from the ARDL equation. 5. The ECM has been rectified and addressed 6. Institutional quality explanation and sign have been aligned. 7. The link for extended data has been rectified with the correct link. Competing Interests: No competing interests Close Report a concern Respond or Comment COMMENTS ON THIS REPORT Author Response 30 Sep 2025 Brigitte FIkunawa , Business and Economic Science, Nelson Mandela University, Port Elizabeth, South Africa 30 Sep 2025 Author Response 1. The proposed changes in the abstract have been attended to and rectified. 2. All typos have been rectified 3. The variable logGDP had been renamed to GDP to represent ... Continue reading 1. The proposed changes in the abstract have been attended to and rectified. 2. All typos have been rectified 3. The variable logGDP had been renamed to GDP to represent GDP growth, 4. FDI was a typo and redundant. It has been removed from the ARDL equation. 5. The ECM has been rectified and addressed 6. Institutional quality explanation and sign have been aligned. 7. The link for extended data has been rectified with the correct link. 1. The proposed changes in the abstract have been attended to and rectified. 2. All typos have been rectified 3. The variable logGDP had been renamed to GDP to represent GDP growth, 4. FDI was a typo and redundant. It has been removed from the ARDL equation. 5. The ECM has been rectified and addressed 6. Institutional quality explanation and sign have been aligned. 7. The link for extended data has been rectified with the correct link. Competing Interests: No competing interests Close Report a concern COMMENT ON THIS REPORT Comments on this article Comments (0) Version 2 VERSION 2 PUBLISHED 11 Aug 2025 ADD YOUR COMMENT Comment keyboard_arrow_left keyboard_arrow_right Open Peer Review Reviewer Status info_outline Alongside their report, reviewers assign a status to the article: Approved The paper is scientifically sound in its current form and only minor, if any, improvements are suggested Approved with reservations A number of small changes, sometimes more significant revisions are required to address specific details and improve the papers academic merit. Not approved Fundamental flaws in the paper seriously undermine the findings and conclusions Reviewer Reports Invited Reviewers 1 2 3 4 Version 2 (revision) 06 Oct 25 read read read Version 1 11 Aug 25 read Tafirenyika Sunde , North-West University, Potchefstroom, South Africa Kwadwo Boateng Prempeh , Sunyani Technical University, Sunyani, Ghana Rui Alexandre Castanho , Instituto Politécnico de Portalegre (IPP), Portalegre, Portugal Muntasir Murshed , Daffodil International University, Dhaka, Bangladesh Comments on this article All Comments (0) Add a comment Sign up for content alerts Sign Up You are now signed up to receive this alert Browse by related subjects keyboard_arrow_left Back to all reports Reviewer Report 0 Views copyright © 2026 Murshed M. This is an open access peer review report distributed under the terms of the Creative Commons Attribution License , which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. 08 Jan 2026 | for Version 2 Muntasir Murshed , Daffodil International University, Dhaka, Bangladesh 0 Views copyright © 2026 Murshed M. This is an open access peer review report distributed under the terms of the Creative Commons Attribution License , which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. format_quote Cite this report speaker_notes Responses (0) Approved With Reservations info_outline Alongside their report, reviewers assign a status to the article: Approved The paper is scientifically sound in its current form and only minor, if any, improvements are suggested Approved with reservations A number of small changes, sometimes more significant revisions are required to address specific details and improve the papers academic merit. Not approved Fundamental flaws in the paper seriously undermine the findings and conclusions This research work examines a relevant and timely issue with clear policy implications. With further refinement, it has the potential to make a meaningful contribution. Please consider the following comments to improve your study further: a. The abstract could be improved by clearly and concisely presenting the research objectives, data, and methodology, key findings, and principal policy implications. b. Strengthening the introduction with a more comprehensive background and theoretical context would help readers better understand the motivation and relevance of the study. c. Clearly identifying the gaps in the existing literature and explicitly stating the study’s contributions would significantly improve the positioning of the research. d. Including a brief overview of the main findings at the end of the introduction would enhance coherence and guide the reader through the paper. e. The literature review would benefit from broader coverage, particularly by incorporating recent and relevant studies published within the last two to three years. f. Providing stronger justification for the chosen methodology, including a discussion of its suitability and advantages, would improve the credibility of the empirical analysis. g. The findings could be more deeply embedded within relevant theoretical frameworks and discussed in relation to prior empirical studies, highlighting both consistencies and deviations. h. The conclusion could be made more concise while clearly emphasizing the key contributions and implications of the study. i. Policy recommendations could be sharpened by making them more specific, actionable, and directly derived from the empirical findings, rather than remaining generic. j. Expanding the discussion on future research directions would help identify promising avenues for extending and deepening the current analysis. Is the work clearly and accurately presented and does it cite the current literature? Partly Is the study design appropriate and is the work technically sound? Yes Are sufficient details of methods and analysis provided to allow replication by others? Yes If applicable, is the statistical analysis and its interpretation appropriate? Yes Are all the source data underlying the results available to ensure full reproducibility? Yes Are the conclusions drawn adequately supported by the results? Yes Competing Interests No competing interests were disclosed. Reviewer Expertise Environmental Economics I confirm that I have read this submission and believe that I have an appropriate level of expertise to confirm that it is of an acceptable scientific standard, however I have significant reservations, as outlined above. reply Respond to this report Responses (0) Murshed M. Peer Review Report For: Financial Sector Development, Institutional Quality and Environmental Degradation in Namibia [version 1; peer review: 1 approved with reservations] . F1000Research 2025, 14 :781 ( https://doi.org/10.5256/f1000research.188867.r439318) NOTE: it is important to ensure the information in square brackets after the title is included in this citation. The direct URL for this report is: https://f1000research.com/articles/14-781/v2#referee-response-439318 keyboard_arrow_left Back to all reports Reviewer Report 0 Views copyright © 2026 Castanho R. This is an open access peer review report distributed under the terms of the Creative Commons Attribution License , which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. 07 Jan 2026 | for Version 2 Rui Alexandre Castanho , Instituto Politécnico de Portalegre (IPP), Portalegre, Portugal 0 Views copyright © 2026 Castanho R. This is an open access peer review report distributed under the terms of the Creative Commons Attribution License , which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. format_quote Cite this report speaker_notes Responses (0) Not Approved info_outline Alongside their report, reviewers assign a status to the article: Approved The paper is scientifically sound in its current form and only minor, if any, improvements are suggested Approved with reservations A number of small changes, sometimes more significant revisions are required to address specific details and improve the papers academic merit. Not approved Fundamental flaws in the paper seriously undermine the findings and conclusions The article examines the relationship between financial sector development, institutional quality, and environmental degradation in Namibia, using annual time-series data from 1990 to 2023 and an ARDL modelling framework. Environmental degradation is measured by CO₂ emissions per capita, financial development by credit to the private sector, and institutional quality by a governance index. In fact, the topic is timely and relevant, and the focus on a climate-vulnerable, resource-dependent country adds value. The econometric approach is suitable, and the authors promote transparency by sharing their data. Still, clarity is reduced by inconsistent terminology, unresolved confusion about variable definitions (notably GDP versus log GDP), limited explanation of key indicators, and insufficient methodological detail for full replicability. More importantly, the interpretation of the results and the resulting conclusions raise significant concerns. The positive relationship identified between institutional quality and environmental degradation is not clearly explained and contradicts both the paper’s theoretical framework and its policy recommendations, which support strengthening institutions. This inconsistency, along with the absence of robustness checks, small-sample limitations, and weak alignment between empirical findings and policy implications, undermines the study’s scientific validity. Substantial revisions are needed to clarify variable construction, improve methodological transparency, address the institutional quality result, and ensure that conclusions and recommendations are fully supported by the evidence. Is the work clearly and accurately presented and does it cite the current literature? Partly Is the study design appropriate and is the work technically sound? Partly Are sufficient details of methods and analysis provided to allow replication by others? Partly If applicable, is the statistical analysis and its interpretation appropriate? Partly Are all the source data underlying the results available to ensure full reproducibility? Partly Are the conclusions drawn adequately supported by the results? No Competing Interests No competing interests were disclosed. Reviewer Expertise Sustainable development economics; environmental and climate policy; financial development and green finance; institutional quality and governance. I confirm that I have read this submission and believe that I have an appropriate level of expertise to state that I do not consider it to be of an acceptable scientific standard, for reasons outlined above. reply Respond to this report Responses (0) Castanho RA. Peer Review Report For: Financial Sector Development, Institutional Quality and Environmental Degradation in Namibia [version 1; peer review: 1 approved with reservations] . F1000Research 2025, 14 :781 ( https://doi.org/10.5256/f1000research.188867.r446880) NOTE: it is important to ensure the information in square brackets after the title is included in this citation. The direct URL for this report is: https://f1000research.com/articles/14-781/v2#referee-response-446880 keyboard_arrow_left Back to all reports Reviewer Report 0 Views copyright © 2025 Prempeh K. This is an open access peer review report distributed under the terms of the Creative Commons Attribution License , which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. 28 Oct 2025 | for Version 2 Kwadwo Boateng Prempeh , Accounting and Business Analyt, Sunyani Technical University, Sunyani, Brong Ahafo Region, Ghana 0 Views copyright © 2025 Prempeh K. This is an open access peer review report distributed under the terms of the Creative Commons Attribution License , which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. format_quote Cite this report speaker_notes Responses (0) Not Approved info_outline Alongside their report, reviewers assign a status to the article: Approved The paper is scientifically sound in its current form and only minor, if any, improvements are suggested Approved with reservations A number of small changes, sometimes more significant revisions are required to address specific details and improve the papers academic merit. Not approved Fundamental flaws in the paper seriously undermine the findings and conclusions Financial Sector Development, Institutional Quality and Environmental This study examines the relationship between financial sector development, institutional quality, and environmental degradation in Namibia using the ARDL methodology with time series data from 1990 to 2023. While the topic is timely and relevant, particularly for understanding climate change dynamics in sub-Saharan Africa, several methodological and presentational issues require attention before publication. 1. The abstract contains an incomplete sentence in the conclusion section. The final sentence states that Namibia should strengthen the role of institutions and support financial innovation, but ends with "address environmental degradation. Additionally, encouragement of environmental, societal, and governance (ESG) led business investments is needed, without completing the thought about what role institutions should play. The abstract also uses terminology inconsistently, shifting between environmental degradation, environmental quality, and environmental sustainability as though these are interchangeable when they actually represent different concepts. 2. The introduction paragraph structure is quite dense, with the opening paragraph covering global environmental challenges, the African context, Namibian specifics, economic activities, and policy responses all in one extended discussion. Breaking this into two or three focused paragraphs would improve readability. The flow from global context to African context to Namibian context could also be smoother, with clearer transitions between levels of analysis. Throughout the introduction, claims such as "various laws have been implemented" would be strengthened by quantification, specifying how many laws, when they were implemented, and what they aimed to achieve. 3. The paper presents two theories (the Treadmill of Production and Environmental Kuznets Curve) but lacks explicit hypothesis formulation derived from these frameworks. The connection between theory and empirical testing remains unclear. The authors should develop specific, testable hypotheses based on the theoretical discussion rather than simply reviewing theories and proceeding to empirical analysis. Additionally, the paper needs to clarify which theory it primarily tests or whether it attempts to reconcile both perspectives. The introduction establishes that Namibia faces unique environmental challenges as a hyper-arid country heavily dependent on natural resource extraction. However, the theoretical section does not adequately explain why Namibia represents an appropriate context for testing these theories or how the Namibian case might offer unique insights into the finance-institutions-environment nexus. 4. The study uses CO₂ per capita as the sole environmental degradation measure, justified by data constraints. However, given that Namibia's primary environmental challenge is land degradation and desertification rather than carbon emissions, as the introduction itself emphasises, this proxy may not capture the most relevant environmental impacts. The paper acknowledges this limitation briefly but should discuss it more extensively, perhaps exploring whether findings might differ with more contextually appropriate measures. The measurement of institutional quality also lacks sufficient detail. The paper does not specify which index or composite measure was used, how it was constructed, or what dimensions of governance it captures. This information is critical for replicability and for understanding what the results actually mean. 5. The literature review, while comprehensive in citing relevant studies, lacks a clear organisational structure. Studies are presented somewhat chronologically or geographically without clear thematic organisation. The review would benefit from restructuring around key themes such as institutional quality effects, financial development effects, interactive effects, and methodological approaches. Within each theme, the review should move from general findings to context-specific findings, ultimately identifying the gap that the current study addresses. 6. The review also needs more critical synthesis. Rather than simply reporting that some studies find X while others find Y, the paper should analyse why findings differ across contexts, what methodological choices drive different conclusions, and what theoretical mechanisms might explain divergent results. This critical engagement would better position the current study within the literature and clarify its unique contribution. 7. The review places insufficient emphasis on the African context. While several African studies are cited, the review does not adequately discuss how findings from developed economies or Asian emerging markets might or might not transfer to the sub-Saharan African context. Given the paper's focus on Namibia, more attention to studies from similar semi-arid, resource-dependent economies would strengthen the contextual grounding. Also, consider including this relevant literature to improve the section: https://doi.org/10.1186/s43093-023-00286-1, https://doi.org/10.1080/23322039.2024.2308675 8. The confusion between GDP growth and logGDP persists throughout the paper. The text refers to GDP growth, suggesting a rate of change, while Table 1 shows logGDP, which represents the logarithm of GDP levels. These are fundamentally different variables with different interpretations. If the analysis uses GDP growth rates, the tables should reflect this; if it uses log levels, the text should be consistent. This inconsistency undermines confidence in the reported results. 9. With only 31-34 observations depending on the variable, the study faces potential statistical power issues, particularly given the number of parameters estimated in the ARDL model. Time series analysis with small samples can produce unstable estimates, and this limitation deserves explicit discussion in a limitations section. The paper should address whether the sample size is adequate for the chosen methodology and whether a few influential observations might drive results. 10. The ARDL equation contains several specification problems. The subscript notation switches inconsistently between i and t, creating confusion about whether this is panel or time series analysis. There is an unexplained aqt term that appears without definition. Most importantly, natural resource rent appears prominently in the literature review and abstract but does not appear in the empirical model. Either NRR should be included as a variable or its exclusion should be explicitly justified. Given that Namibia's economy depends heavily on natural resource extraction, omitting this variable seems problematic and may bias other coefficients. The paper also does not discuss how optimal lag lengths were selected for the ARDL model or present information criteria used to determine the lag structure, which is standard practice in ARDL applications. 11. The most problematic issue in the paper is the positive relationship between institutional quality and environmental degradation. While the authors acknowledge this finding contradicts expectations and cite some supporting literature, the explanation remains theoretically unsatisfying and internally inconsistent. The finding contradicts a substantial body of literature cited in the same paper, including several studies that find institutional quality reduces environmental degradation. More fundamentally, the interpretation that weak institutions cause degradation creates a logical problem. If institutional quality is measured on a scale where higher values indicate better institutions, then the positive coefficient suggests that better institutions increase degradation, not that weak institutions do. Conversely, if weak institutions are responsible, the coefficient should be negative. 12. The counterintuitive institutional quality finding requires fundamental reconceptualisation rather than simple acknowledgement. The authors should consider several approaches. First, they could test for non-linear effects by including a squared term for institutional quality to see whether the relationship changes direction at different quality levels. Second, they could examine whether alternative measures of institutional quality (regulatory quality, rule of law, government effectiveness, etc.) produce different results, which would indicate measurement sensitivity. Third, they could conduct qualitative institutional analysis to understand what aspects of Namibian governance might produce this unexpected pattern. Fourth, they could explicitly model potential reverse causality using instrumental variables or other techniques. Without addressing this central finding more thoroughly, the paper's contribution remains questionable. 13. This apparent contradiction suggests several possibilities that deserve exploration. First, there may be measurement issues with the institutional quality variable, particularly if it does not adequately capture environmental governance capacity. Second, there may be reverse causality, where environmental crises prompt institutional responses, creating a positive correlation. Third, there may be a non-linear relationship not captured by the linear specification, where institutional quality has different effects at different levels of development. Fourth, the result might reflect Namibia's specific institutional context, where governance structures prioritise economic development from resource extraction over environmental protection. The paper needs to investigate these possibilities more thoroughly rather than simply accepting the findings at face value. 14. The policy recommendations do not logically follow from the findings, creating further confusion. If institutional quality increases degradation, as the results indicate, why should the policy recommendation be to strengthen institutions? The disconnect between findings and recommendations needs resolution. Either the authors should reinterpret their findings, demonstrate why the counterintuitive result is actually correct, or acknowledge fundamental uncertainty about the institutional quality effect. 15. The diagnostic test results in Table 6 appear quite late in the results section, after the main coefficients have been presented and interpreted. Standard practice places diagnostic tests immediately after or alongside the main results to establish the validity of the estimates before interpretation proceeds. The tables themselves could be more informative. Table 1 presents basic descriptive statistics, but could add skewness and kurtosis better to assess distributional properties relevant for time series analysis. Tables 4 and 5 present coefficient estimates but omit overall model fit statistics such as R-squared or adjusted R-squared, making it difficult to assess how well the model explains variation in environmental degradation. 16. The stationarity testing section presents results from three different unit root tests (Augmented Dickey-Fuller, Dickey-Fuller, and Phillips-Perron) but does not explain why three tests were necessary or how any conflicts between test results were resolved. In cases where different tests give different answers about integration order, researchers must justify which result they rely on. The paper presents all three sets of results without synthesis. 17. The cointegration analysis confirms that long-run relationships exist between the variables through the bounds testing procedure, but the paper does not discuss the economic interpretation of this cointegration. What does it mean economically that these variables move together in the long run? Does this suggest common driving forces, causal relationships, or simply correlated trends? The existence of cointegration has policy implications that deserve discussion. 18. The error correction term of -0.926 indicates rapid adjustment to equilibrium, with full adjustment occurring in approximately 1.08 years. The paper mentions this speed but does not interpret what it implies for policy. A rapid adjustment speed suggests that shocks to environmental quality are quickly corrected, which might mean that policy interventions need to be sustained rather than one-time efforts. Alternatively, it might suggest that environmental degradation responds relatively quickly to changes in financial development or institutional quality, making these effective policy levers. This interpretation is missing. 19. While the paper mentions data sources generally, full replicability requires more detailed documentation. A table listing each variable with its exact source, frequency, original units, and any transformations applied would be valuable. For example, if GDP was log-transformed, at what stage was this transformation applied? Were any variables deflated or adjusted for inflation? How were any currency conversions handled? 20. The paper notes that renewable energy data covers only 31 observations while other variables have 34 observations, creating a data gap. How was this gap handled? Was the analysis conducted on the common time period of 31 observations, or were missing values imputed, or does the ARDL procedure handle unbalanced data in some way? These details matter for interpreting the results and for any replication attempts. 21. The data availability statement mentions an extended data file but provides a Mendeley link that may not be permanently accessible. Best practice for published articles is to deposit data in a stable repository with a persistent identifier and to provide complete documentation of all data sources, transformations, and coding decisions. 22. The Namibian context needs substantial strengthening throughout the paper. While the introduction mentions Namibia's arid climate and resource dependence, subsequent sections lose sight of this context. The empirical section should include more discussion of specific Namibian policies, institutional structures, and financial sector characteristics that might explain the results. For example, how does Namibia's financial sector compare to regional peers? What specific environmental regulations exist, and how effectively are they enforced? What is the composition of the institutional quality index in the Namibian case? Grounding the analysis more firmly in Namibian reality would help readers understand whether findings are generalisable or context-specific. 23. Robustness checks are essential for establishing confidence in the results. The paper should explore alternative model specifications, including squared terms for Environmental Kuznets Curve testing, interaction terms between financial development and institutional quality to test whether their effects are complementary or substitutable, and different lag structures in the ARDL specification. If alternative measures of environmental degradation are available even for shorter time periods, sensitivity analysis using these alternatives would be valuable. Sub-period analysis could check whether relationships have been stable over time or whether structural breaks exist. These robustness checks need not all appear in the main text but could be relegated to appendices with key findings summarised in the discussion. 24. The conclusion section feels rushed and underdeveloped relative to the complexity of the findings. Policy recommendations should be more specific and actionable, moving beyond general statements about strengthening institutions and supporting green finance. What specific institutional reforms would be most effective? What types of financial instruments or incentive structures would best channel capital toward environmental sustainability in Namibia's context? How can the apparent tension between institutional development and environmental outcomes be navigated in policy design? What implementation challenges might arise, and how could they be addressed? A more robust conclusion would also discuss limitations more explicitly and outline a clear agenda for future research. 25. The response to the previous reviewer's comments, while indicating that changes were made, does not appear to have fully resolved the issues raised. The GDP versus logGDP confusion persists, suggesting incomplete revision. A more thorough response to reviewer concerns is needed, ensuring that each point is not just acknowledged but actually addressed in the revised manuscript. 26. Throughout the manuscript, several specific corrections are needed. On page 3, the statement that "Propelling growth through the extractive primary sector strains the environment" requires citation, as this is an empirical claim rather than self-evident fact. On page 6, the notation "β1 β13 are short- and long-run parameters" should specify which parameters correspond to short-run effects and which to long-run effects. On page 7, there appears to be an inconsistency in significance level reporting, where institutional quality shows a p-value of 0.0875 in the table, but the text describes it as significant, which, at conventional levels, it is not. The references section should be checked to ensure that all citations in the text appear in the reference list and vice versa, and that all reference formatting is consistent. Is the work clearly and accurately presented and does it cite the current literature? Partly Is the study design appropriate and is the work technically sound? Partly Are sufficient details of methods and analysis provided to allow replication by others? Partly If applicable, is the statistical analysis and its interpretation appropriate? Partly Are all the source data underlying the results available to ensure full reproducibility? Partly Are the conclusions drawn adequately supported by the results? No Competing Interests No competing interests were disclosed. Reviewer Expertise Sustainable Development, Financial Development, Renewable energy, corporate finance I confirm that I have read this submission and believe that I have an appropriate level of expertise to state that I do not consider it to be of an acceptable scientific standard, for reasons outlined above. reply Respond to this report Responses (0) Prempeh KB. Peer Review Report For: Financial Sector Development, Institutional Quality and Environmental Degradation in Namibia [version 1; peer review: 1 approved with reservations] . F1000Research 2025, 14 :781 ( https://doi.org/10.5256/f1000research.188867.r421241) NOTE: it is important to ensure the information in square brackets after the title is included in this citation. The direct URL for this report is: https://f1000research.com/articles/14-781/v2#referee-response-421241 keyboard_arrow_left Back to all reports Reviewer Report 0 Views copyright © 2025 Sunde T. This is an open access peer review report distributed under the terms of the Creative Commons Attribution License , which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. 23 Sep 2025 | for Version 1 Tafirenyika Sunde , North-West University, Potchefstroom, South Africa 0 Views copyright © 2025 Sunde T. This is an open access peer review report distributed under the terms of the Creative Commons Attribution License , which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. format_quote Cite this report speaker_notes Responses (1) Approved With Reservations info_outline Alongside their report, reviewers assign a status to the article: Approved The paper is scientifically sound in its current form and only minor, if any, improvements are suggested Approved with reservations A number of small changes, sometimes more significant revisions are required to address specific details and improve the papers academic merit. Not approved Fundamental flaws in the paper seriously undermine the findings and conclusions Comments and Suggestions · Abstract coherence and completeness Fix grammar and logic: “compounded by an arid and low-income country” → “as an arid, lower-middle-income country.” Align claims with results: abstract says institutional quality reduces degradation, but results show a positive link. Finish the broken concluding sentence and the ESG line so they read as complete sentences. · Variable and model consistency Define the full regressor set once and use it consistently. You introduce CO₂, IQ, FSD, TO, REC, GDP, but the ARDL equation also includes FDI and an unexplained aqt term. Either drop FDI everywhere or add it to the data, tables, and narrative. Use the same GDP measure throughout: Table 1 uses logGDP, text says “GDP growth.” Fix typos in symbols: TO is written as T0 in the ARDL, and FDIt appears without prior definition. · Statistical claims and tests Remove the incorrect claim that “low standard deviations indicate normality.” Descriptives do not test normality. Clean the unit-root table: replace comma decimals (e.g., −3,462) with points, standardise significance stars, and ensure each series’ integration order is stated once. In the bounds section, fix “if?” and clarify the decision rule text. · Tables, diagnostics, and terminolog y Correct test names: “Brush Pagan” → Breusch-Pagan; “Jarqa Bera” → Jarque-Bera. Ensure Table 4–5 coefficients are interpreted consistently with the narrative; reconcile the IQ sign with the write-up. State exactly what the ECT value implies and avoid mixing “within a year” with “1.079 years” without showing the conversion. · Editing and formatting fixes “Question 5 presents the conclusions” → “Section 5 presents…”. Fix spacing and typos: “Chamber ofMines,” “mode is supported,” “reduction degradation,” space in “$ 640 million.” Ensure section numbering, references, and data links are consistent; avoid linking to Mendeley draft URLs in an indexed manuscript. Is the work clearly and accurately presented and does it cite the current literature? Yes Is the study design appropriate and is the work technically sound? Yes Are sufficient details of methods and analysis provided to allow replication by others? Yes If applicable, is the statistical analysis and its interpretation appropriate? Yes Are all the source data underlying the results available to ensure full reproducibility? No source data required Are the conclusions drawn adequately supported by the results? Yes Competing Interests No competing interests were disclosed. Reviewer Expertise Economics, Econometrics, environmental studies and public policy. I confirm that I have read this submission and believe that I have an appropriate level of expertise to confirm that it is of an acceptable scientific standard, however I have significant reservations, as outlined above. reply Respond to this report Responses (1) Author Response 30 Sep 2025 Brigitte FIkunawa, Business and Economic Science, Nelson Mandela University, Port Elizabeth, South Africa 1. The proposed changes in the abstract have been attended to and rectified. 2. All typos have been rectified 3. The variable logGDP had been renamed to GDP to represent GDP growth, 4. FDI was a typo and redundant. It has been removed from the ARDL equation. 5. The ECM has been rectified and addressed 6. Institutional quality explanation and sign have been aligned. 7. The link for extended data has been rectified with the correct link. View more View less Competing Interests No competing interests reply Respond Report a concern Sunde T. Peer Review Report For: Financial Sector Development, Institutional Quality and Environmental Degradation in Namibia [version 1; peer review: 1 approved with reservations] . F1000Research 2025, 14 :781 ( https://doi.org/10.5256/f1000research.183957.r411614) NOTE: it is important to ensure the information in square brackets after the title is included in this citation. The direct URL for this report is: https://f1000research.com/articles/14-781/v1#referee-response-411614 Alongside their report, reviewers assign a status to the article: Approved - the paper is scientifically sound in its current form and only minor, if any, improvements are suggested Approved with reservations - A number of small changes, sometimes more significant revisions are required to address specific details and improve the papers academic merit. 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