<p>The main aim of this study is to investigate the moderating role of financial development between political stability and environmental sustainability in the context of ASEAN-5 economies (Malaysia, Indonesia, Singapore, Thailand, and the Philippines) from 1996 to 2021. Using FMOLS, DOLS, and the Dumitrescu–Hurlin panel causality test, the research explores how these factors, along with the shadow economy (SE), environmental diplomacy (ED), technology innovation (TP), and population density (PD), influence the ecological footprint (EF). The results indicated that FD positively correlates with EF, signifying that economic growth driven by financial development leads to environmental pressure. On the contrary, SE has a negative relationship with EF, suggesting that informal economic activities are socially detrimental to environmental performance. Moreover, PS and its interaction with FD (PS*FD) are significant for EF; this reveals the significance of stable political climates for forming sound economic policies. Nevertheless, ED has a weak relationship with EF, showing a less direct influence of environmental diplomacy on environmental pollution. The Dumitrescu–Hurlin causality test also strengthens these findings by revealing the bilateral causality between FD and EF and the one-way causality between SE, PS, PS*FD, and TP and EF. Hence, policy implications draw attention to environmental issues' inclusion in the financial systems, legalizing the shadow economy, stabilizing the political environment for sustainability policies, and supporting technological progress focused on environmental objectives. Understanding these patterns is vital for the policymakers to achieve the aim of economic development and conservation of natural resources in the selected ASEAN countries.</p> Graphical abstract <p></p>