This study examines the dynamic impact of financial inclusion (FIN), urbanization (URP), and natural resource depletion (NR) on environmental degradation (CO2 emissions) in the group of seven economies (G7) between 2000 and 2021. The study applies TOPSIS to develop a composite index for FIN, focusing on three dimensions that determine the degree of financial inclusion. The CS-ARDL model analysis indicates that a 1% increase in financial inclusion substantially enhances environmental sustainability by reducing carbon emissions by 0.4% in the long run and 0.04% in the short run. However, a 1% increase in urbanization and natural resource depletion leads to an escalation of CO2 emissions by 0.89% and 0.29%, respectively, in the long run, while having a relatively smaller impact on the environment in the short run. Furthermore, by testing the non-linear association between FIN and CO2, we find the presence of a financial inclusion-based Environmental Kuznets Curve (EKC). To ensure the reliability of the result, we utilize two additional second-generation econometric models: AMG and CCEMG. The casual dimensions have revealed that FIN, URP, and NR have bidirectionally Granger caused environmental degradation. The study results discussed various policies based on the FIN, URP, and NR outcomes to improve environmental quality for sustainable development.