<p>Environmental sustainability is now recognized as a major concern of countries. The gradual increase in carbon dioxide emissions in recent decades has created a dire situation. The rapid expansion of productivity and economic progress outweighed environmental harm in ASEAN economies (Singapore, Thailand, the Philippines, Malaysia, and Indonesia). While a large body of research reveals various factors that contribute to environmental sustainability, little consideration has been given to the moderating role of institutional quality in the link between financial development, green energy investment, and environmental hazards. Using AMG, CCEMG, and MG estimators over the period 1995 to 2022, the study reveals that institutional quality and financial development considerably boost long run per capita CO₂ emissions. However, renewable energy investments have a substantial adverse influence on per capita carbon emissions in the long run. Institutional quality plays a strong moderating role in the link between financial development, clean energy investment, and environmental emissions. Finally, the threshold level of institutional quality shows that as institutional quality moves from lower threshold levels (≤ − 1.55) to higher threshold levels (&gt; − 1.55), financial development and renewable energy investment are significant at this level and lead to improvements in environmental quality. Institutional quality supports the ability to scale up financial development and renewable energy investment to amplify ecological sustainability. The findings indicate that the magnitude of the influence of financial development and green energy investment can only be modified by fostering institutional quality. The environmental quality of ASEAN countries can only be improved through quality institutions allocating funds for the development of clean energy projects and green technological innovation.</p> Graphical Abstract <p></p>