Rethinking Foreign Direct Investment’s Role in Sustainable Development: Insights from the E-7 Economies Using Advanced Panel Data Methodologies

Achieving a sustainable energy future is the cornerstone of global efforts to combat environmental degradation and align with corporate social responsibility (CSR) objectives. This study examines the complex relationship between energy consumption, carbon emissions, and the moderating influence of foreign direct investment (FDI) in the E-7 economies of Brazil, China, India, Indonesia, Mexico, Russia, and Türkiye from 2000 to 2022. Employing advanced panel data methodologies, including continuously updated fully modified (Cup-FM) and continuously updated bias-corrected (Cup-BC) techniques, we explored the long-term dynamics of energy use, urbanization, human capital, and FDI. Our findings reveal persistent cointegration among these variables, with energy consumption, urbanization, and human capital significantly contributing to CO2 emissions. However, FDI has emerged as a critical mitigating factor, exhibiting a negative correlation with carbon emissions and moderating the emission-enhancing effects of urbanization and human capital. These results underscore the dual role of FDI as both an engine of economic growth and a catalyst for environmental sustainability. This study advocates for prioritizing green FDI inflows, particularly in renewable energy infrastructure, to harmonize economic development with global sustainability targets. By integrating CSR strategies with energy transition policies, this study provides actionable insights for policymakers and corporate leaders to foster sustainable development in rapidly industrializing economies. These findings contribute to the broader discourse on sustainable development, emphasizing the need for strategic investments and policy frameworks to achieve a low-carbon future.