Determinants of the sustainable development index in G7 countries

Abstract Sustainable development is a globally significant concept with various definitions. Problems stemming from climate change, in particular, have made sustainable development goals a necessity for global economies. The sustainable development index is calculated by considering environmental, economic, and social dimensions. This study examines the effects of economic growth, financial development, digitalization, and renewable energy consumption on the sustainable development index in G7 countries for the period 2000–2022. Using advanced panel data techniques that account for cross-sectional dependence and heterogeneity, the study employed the Nazlioglu et al. (2023) PANIC Fourier unit root test and the Westerlund and Edgerton (2008) cointegration test. After determining the cointegration relationship, long-term panel cointegration coefficients were determined using the Augmented Mean Group (AMG) and Regularized Common Correlated Error (rCCE) estimators. The findings showed that economic growth decreased the sustainable development index, while renewable energy consumption and financial development increased it. The effect of the digitalization variable on the sustainable development index was not statistically significant. These findings highlight that sustainable development in G7 countries requires not only continued support for renewable energy and green finance systems, but also a critical reassessment of growth strategies. Policymakers should strengthen environmental governance frameworks to ensure that economic and technological progress translates into measurable improvements in sustainable development outcomes.