How does ICT diffusion affect environmental sustainability in KSA? The moderating role of financial sector

Environmental sustainability (ES) is increasingly shaped by technological advancement, particularly through the diffusion of information and communication technologies (ICT). While ICT has the potential to improve environmental outcomes, its effectiveness often depends on supportive financial systems that can fund green innovation and infrastructure. This paper examines the impact of the interaction between ICT diffusion and financial development (FD) on ES. This relationship was assessed using the quantile regression (QR) approach in the KSA from 1990 to 2019. First, at aggregate level, our empirical results suggest that both FD and ICT increase ES. Additionally, the combined effect of FD and ICT improves ES. Secondly, at disaggregate levels, the FD index indicates that Bank deposits and Broad money are likely to compromise ES. In contrast, domestic credit to private sector positively affects ES. However, individuals using the Internet (IUI) and fixed telephone subscriptions (FTS) have a positive impact on ES, while mobile cellular subscriptions (MCS) have a negative impact. Thirdly, the interaction impact between MCS and FD has a negative relationship with ES. In contrast, the interaction effects between FD and IUI, as well as between FD and FTS, exerts a positive influence on environmental sustainability. This study recommends that the Kingdom of Saudi Arabia’s government and policymakers can achieve environmental sustainability more rapidly by promoting financial development in conjunction with the internet use and fixed subscriptions, rather than focusing on mobile subscriptions growth.