Political, Economic and Financial Risks and Environmental Sustainability in Upper–Middle-Income Economies: MMQR Evidence from the Load Capacity Factor

Abstract

Achieving sustainable economic development remains a major challenge for upper–middle-income countries, where growth dynamics, urbanization, energy demands and institutional risk conditions jointly shape environmental outcomes. This study examines the associations of political risk, economic risk, financial risk, renewable energy consumption, income per capita and urbanization with the load capacity factor (LCF), a sustainability indicator combining biocapacity and ecological footprint. Using a balanced panel of 26 upper–middle-income countries over the period 1994–2020, the analysis estimates three separate specifications in which political, economic and financial risk indicators are examined individually. The Method of Moments Quantile Regression (MMQR) approach is employed to examine heterogeneity in these associations across the conditional distribution of the LCF, while FM-OLS estimates are reported as robustness checks. The findings indicate a U-shaped income–LCF relationship, as economic growth has a negative coefficient, whereas its squared term is positive. Renewable energy consumption is positively associated with the LCF, whereas urbanization is negatively associated with it. Higher political risk index scores, indicating lower political risk, are positively associated with the LCF. By contrast, higher economic and financial risk index scores, indicating lower risk levels, are associated with lower LCFs, particularly at the middle and upper quantiles. The results highlight the need to combine renewable energy transition, sustainable urban planning, institutional stability and environmentally oriented financial policies.