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• The EU Action Plan on Sustainable Finance boosts private capital investments. • Firms with environmental goals receive more funding than those with social aims. • Policymakers should encourage investments focused on social objectives too. This paper examines the effect that the EU Action Plan on Sustainable Finance has on mobilizing private finance for sustainable-purpose companies. Our results suggest that the EU regulation has substantially augmented the influx of private financial capital into companies with sustainability purposes situated in EU countries subject to the regulation. This is valid mostly for companies whose purpose addresses environmental issues, while companies focused on social issues did not find a significant increase in financial attractions. Our findings contribute to understanding the role of policies to facilitate the transition of private finance towards sustainable development. [ABSTRACT FROM AUTHOR]

• We examine the impact of uncertainty on the relationship between green bond and carbon markets. • The GARCH-MIDAS-X and DCC-MIDAS-X models are used. • Temporary shock-related uncertainty, such as infectious disease risk or geopolitical risk, weakens the relationship. • Policy-related uncertainty strengthens the relationship between green bond and carbon markets. • The complex dynamics of sustainable finance and the importance of managing uncertainty are emphasised. Sustainable financing and regulations to achieve carbon neutrality are important global issues for achieving the Sustainable Development Goals. This study investigates the effects of various global uncertainties on the relationship between green bonds and carbon markets using GARCH-MIDAS-X and DCC-MIDAS-X models. We find that temporary shock-related uncertainty, such as infectious disease risk or geopolitical risk, weakens this relationship, whereas policy-related uncertainty, including uncertainty in climate, economics, and monetary policy, strengthens it. These findings highlight the complex dynamics between sustainable finance mechanisms and the importance of managing uncertainty to facilitate a gradual transition to a sustainable economy. [ABSTRACT FROM AUTHOR]

• We investigate the influence of ESG disagreement on portfolio returns within the EuroStoxx 600 index, using ESG ratings from Morningstar, Refinitiv, and Bloomberg. • We apply the Fama-French-5-Factor model to calculate and compare portfolio alphas across different portfolio sorts. • Firms with higher ESG agreement yield significantly higher returns than firms with low ESG agreement. • This effect vanishes when introducing firm fundamentals such as sorting by market capitalization or Book-to-Market ratio. • Our results call for a cautious approach towards ESG investing and potential need for regulatory advances to reduce ESG rating heterogeneity. This study examines the impact of ESG rating disagreement on portfolio returns for EuroStoxx600 companies. Portfolios are analyzed using ESG data from Morningstar, Refinitiv, and Bloomberg for 458 firms from January 2016 to December 2022. The empirical findings reveal that high ESG agreement portfolios initially show higher returns. However, this effect vanishes when controlling for Book-to-Market ratio and market capitalization. These results challenge the simplistic view of ESG ratings influencing stock returns independently and highlight the need for a cautious approach to ESG investing. Policymakers and investors should consider the heterogeneity in ESG ratings for future regulations and investment decisions. [ABSTRACT FROM AUTHOR]

The connection between the green economy, technology, and finance has recently become a popular topic for analyzing economic and policy matters. Financial technology can provide not only an opportunity to tap into new pools of private capital to finance green and sustainable projects through innovative financial instruments but also provide support to clean technologies through the adoption of voluntary sustainability codes of conduct. However, there is still a lack of clear scientific evidence in the literature about how the green economy interacts with these relevant indicators of sustainable finance. Thus, this paper examines the time-varying causal relationship between indexes of financial technology (FinTech), clean technology (CleanTech), and the green economy (GECON), by applying the novel method proposed by Shi et al. (2018, 2020) on daily data from June 15, 2012 to December 15, 2021. This study finds a higher volatility and causality running from GECON to CleanTech and FinTech for the entire period. Furthermore, the green economy Granger causes FinTech and CleanTech with very significant episodes, especially at the start of the COVID-19 pandemic. The robustness of the results was checked with a rolling window and recursive evolving techniques that overall confirm bidirectional causal relationships between green economy and technology variables. The findings imply that global initiatives to achieve low-carbon economies need to be complemented with the use of clean technologies in the production process and the continuous digitalization of financial sectors. The promotion of clean technology production by governments and the increased interest of investors in FinTech industries will stimulate green economic growth. [ABSTRACT FROM AUTHOR]

Focusing on biodiversity risks, we perform an empirical asset pricing analysis and document three main results. First, the factor going long on low biodiversity intensity assets and short on high biodiversity intensity ones as well as the factors based on the biodiversity intensity subcomponents (land use, greenhouse gases—GHG, air pollution, and water pollution) have heterogeneous dynamics but are not spanned by the Fama and French (2015) and carbon factors. Second, the biodiversity factor excluding the GHG subcomponent (ex-GHG) commands a positive risk premium on realized returns and a negative one on expected returns in the sector highly exposed to the double materiality of biodiversity risks (i.e., physical and transition risks). Third, we show that the negative premium of both the biodiversity and the ex-GHG biodiversity factors on expected returns has materialized strongly from 2021 onward and that it amplifies with attention to biodiversity issues and risk aversion. [ABSTRACT FROM AUTHOR]

Green finance, which includes climate finance, is a highly relevant issue for climate change mitigation and adaptation, as well as for the transition to a renewable and sustainable energy economy. However, it constitutes a diverse and multi-layered field whose contents and interrelationships are not easily tangible and which lacks a widely accepted definition. Using quantitative bibliometric methods, this article analyzes a dataset of 942 peer-reviewed articles on green finance and their 37,255 references. It provides a structured and objective overview of the nine main research streams, their prevalence over time, high-impact publications, and the degree of information exchange between them. The main streams of green finance research address different levels of analysis, focus on a range of topics from several scientific fields, and arguably evidence little intellectual exchange. Based on the findings, it is suggested how future research on green finance can coalesce across disciplines to increase its productivity and efficiency. • A structured summary and analysis of the nine main research streams on green finance. • Based on an informetric analysis of the 37,255 references of 942 articles. • Research is cross-disciplinary and addresses different levels of analysis. • Intellectual exchange between research streams is arguably low. • It is discussed how future research on green finance can become more productive and efficient. [ABSTRACT FROM AUTHOR]

• We examine the motivations of willingness to do good in green investment. • Being good (altruism) is the most significant driver of green investment. • Feeling good (warm glow) does not influence investment in green funds. • Acting for good (impact) influence depends on individual characteristics. This paper empirically investigates the determinants of willingness to do good of green investment within a real-world context. Using data from a questionnaire administered between December 2021 and January 2022 to French individual investors, we find that "being good" (altruism) and "acting for good" (perceived impact) exert a substantial influence on both the decision-making process and the amount invested in green funds, while positive emotions (warm glow) are not significantly linked. This research highlights the core importance of altruism in green investment decision. [ABSTRACT FROM AUTHOR]

• Corporate carbon performance (CCP) is negatively associated with a firm's total, idiosyncratic and systematic risk. • Country-level governance quality accentuates the negative association between corporate carbon performance (CCP) and firm risk. • Country-level business culture, emissions trading schemes, climate change performance and attention to carbon emissions accentuate the negative association between CCP and firm risk. • Given the growing demands from regulatory bodies for increased transparency on carbon performance, the insights gained from our research hold significant relevance for regulators, policymakers, investors, financial analysts, scholars, and businesses. This study examines the association between corporate carbon performance (CCP) and firm risk using a sample of 9,212 firm-year observations from 13 countries in the Asia-Pacific region over the period 2002–2021. We also examine the moderating role of the quality of country-level governance in the association between CCP and firm risk. We find that CCP is negatively associated with a firm's total, idiosyncratic and systematic risk and that country-level governance quality accentuates the negative association between CCP and firm risk. We also find that country-level business culture, emissions trading schemes, climate change performance and attention to carbon emissions accentuate the negative association between CCP and firm risk. Given the growing demands from regulatory bodies for increased transparency on carbon performance, the insights gained from our research hold significant relevance for regulators, policy makers, investors, financial analysts, scholars and businesses. [ABSTRACT FROM AUTHOR]

• China's NEDC policy has a significant positive impact on urban green development, as measured by green total factor productivity. • Government intervention, environmental attention, and industrial upgrading mediate the relationship between the NEDC policy and urban green development. • Financial development moderates the impact of the NEDC policy on urban green development, with stronger effects in cities with higher levels of financial development. • The effectiveness of the NEDC policy varies across regions and city types, highlighting the importance of considering local context in policy design and implementation. • The study offers valuable insights for policymakers and stakeholders seeking to promote sustainable urban development through targeted energy transition policies. In the context of China's rapid urbanization and pressing environmental challenges, this study evaluates the effectiveness of the New Energy Demonstration Cities initiative in fostering sustainable urban development. Employing a quasi-experimental design, the study specifically analyzed the impact of this initiative on urban green development, quantified through the metric of Green Total Factor Productivity (GTFP). The findings reveal significant improvements in GTFP, indicating enhanced air pollution control and energy use efficiency through targeted government intervention and industrial upgrading, moderated by financial development. These results not only challenge the efficacy of broad, non-specific policies but also underscore the importance of precision in policy targeting. The study highlights how well-crafted, localized energy policies can drive substantial gains in sustainable urban growth, offering crucial insights for global policymakers and urban planners. This research extends the discourse on policy effectiveness in environmental management, suggesting pivotal areas for future investigation. [ABSTRACT FROM AUTHOR]

The prominent growth in environmental, social and governance (ESG) investment is evident, with the number of global assets managed sustainably more than doubled over the last decade. This trend is expected to continue until 2030. This type of financial data is positive but given the United Nations stated 'climate emergency' and 'climate survival' in society today, there needs to be an even greater acceleration of growth in ESG investment. Unfortunately, significant negativity has emerged on ESG in recent years. This 'Cutting Edge' study explores the reasons why and how ESG investment has veered off the journey towards enabling society to achieve both its targets under the 2030 United Nations Sustainable Energy Agenda and the 2015 Paris Agreement. It examines the factors prompting leading multinational companies, particularly in the energy and food sectors, to shift their corporate strategies. The key message advanced is that ESG frameworks and guidelines are not problematic; rather, the issue lies in the practice of ethics in decision-making within corporations. Addressing this ethical challenge, which is at the heart of ESG practices, across different professions and disciplines can rebuild trust among stakeholders in ESG investing. This form of interdisciplinary 'just transition ethics' can re-orient us back on the journey towards a just and sustainable world. • Reviews the importance and positive impact of ESG investments. • Negativity concerning ESG is noted but is misguided. • Key challenge is to diffuse ethics into ESG decision-making and frameworks. • Advances the need for 'just transition ethics' to align ESG with the just transition. [ABSTRACT FROM AUTHOR]

Understanding the determinants of firms' ESG performance is not only a key goal of the strategic management field, but it is also fundamental for addressing the world's most pressing environmental and social challenges and guarantee the survival of ESG as well. To date, no comprehensive overview has been carried out of the determinants that have the greatest impact on ESG criteria. In this work, internal and external determinants are identified and analysed, and the potential causes of the discrepancies in research findings are explored. This Systematic Literature Review was developed in accordance with the PRISMA guidelines, whose process led to a content analysis of the results. The current study proves that the discrepancies in literature findings are a direct consequence of the lack of consideration by scholars of the different usage of ESG data providers as well as the variance among countries. Not only does this study represent the first pioneering framework on the topic, but it could also serve as a guidebook for firms wishing to improve their ESG performance. [ABSTRACT FROM AUTHOR]

• How do stocks respond to environmental, social, and governance (ESG) regulatory interventions? • How do ESG reputations influence the magnitude of such responses? • How establishing a mandate for "reasonable assurance" on ESG affected returns • ESG scores positively shielded firm-level investor reactions • Governance component most influential How do stocks respond to environmental, social, and governance (ESG) regulatory interventions, and in what way do ESG reputations influence the magnitude of such responses? Through an event study approach, we investigate how establishing a mandate for "reasonable assurance" on ESG metrics affected market and firm-level returns in India. Findings reveal persistent negative post-event cumulative abnormal market returns declining to –1.20 % during the [+1,+5] window. The imposition of the reasonable assurance mandate depressed the market. However, consistent with a reservoir of goodwill hypothesis, ESG scores positively shielded firm-level investor reactions, with the governance component of ESG being the most influential. [ABSTRACT FROM AUTHOR]

This paper explores the suitability of sustainability-linked bonds (SLBs) for signaling sustainability intentions by analyzing the market reaction following their announcement and issuance. We find no significant share price reaction for SLBs targeting greenhouse gas emission reduction objectives. The lack of significant market reaction also applies to SLB-independent emission-reduction announcements. In contrast, for other types of SLB goals, such as those linked to sustainability ratings, renewable energy, or energy efficiency, we observe a significant positive market reaction. We argue that climate transition activities of companies are already priced by the market, while other sustainability goals are positively received. • We explore the suitability of sustainability-linked bonds (SLBs) for signaling sustainability intentions. • We find no significant share price reaction for SLBs targeting greenhouse gas emission reduction objectives. • In contrast, the market reacts positively to other types of SLB goals. • These findings indicate that climate transition activities of companies are already priced by the market. • At the same time, other sustainability goals are positively received. [ABSTRACT FROM AUTHOR]

In the context of China's pursuit of an ecological civilization, controlling haze pollution (HP) and enhancing environmental quality occupy a pivotal role. Addressing this issue, this study utilizes a dataset spanning from 2006 to 2020, encompassing 278 Chinese cities, to examine the impact and mechanisms of sustainable finance on HP management. This research innovatively constructs a Sustainable Finance Index and employs fixed effects models, mediation effect models, and spatial Durbin models for comprehensive empirical analysis. The findings indicate a significant negative relationship between sustainable finance and HP, with pronounced effects in cities experiencing severe haze, cities in the central and eastern regions of China, and non-provincial boundary cities. Mechanism analysis reveals that sustainable finance curtails urban haze formation through the optimization of energy consumption structure, enhancement of energy efficiency, and advancement of environmental technologies. This is primarily achieved through pollution source reduction and innovation effects. Additionally, the study uncovers a spatial spillover effect of sustainable finance in mitigating HP, peaking within a 500-km radius. This research not only provides new insights into the role of sustainable finance in the construction of ecological civilization but also offers empirical support for policymakers and stakeholders in formulating clean production policies, enhancing both the academic dialogue and practical policymaking in environmental management and sustainable development. [ABSTRACT FROM AUTHOR]

Sustainable finance and investment has become an important factor in achieving environmental sustainability. Evidence also suggests it has become more prominent in the global financial system. Although academic interest has increased in recent years, most prior studies have investigated support for sustainable finance within corporate environments. Studies examining the support of individuals, or the wider public, are scarce. Consequently, using a Eurobarometer survey of 27,862 Europeans across all 27 EU countries, this study explores support for sustainable finance among people in Europe. We used a nested fixed effects model – with two levels – to examine the influence of sociodemographic factors, knowledge of sustainable finance, and a country's progress towards attaining the United Nations Sustainable Development Goals (SDGs). Our results show that sociodemographic factors are the most influential predictors of support for sustainable finance. We found that age, gender and living in rural/urban areas all influenced people's support for sustainable finance. Meanwhile, the influence of sustainable finance knowledge and SDG progress were either negligible or negative. [ABSTRACT FROM AUTHOR]

How financial investors may react to policy events related to sustainability and climate change mitigation in particular, is a key question with implications for sustainable finance and financial stability. We address this question by carrying out a multi-period difference-in-difference approach on a confidential database of securities holdings of the European Central Bank, and we provide evidence of several effects related to the Paris Agreement. In aggregate, investors reduced their participation in the equities of high-carbon firms in response to the agreement, and the trend reverted after the US's announcement of withdrawal from the agreement. However, the reaction varies across categories and geographies of the securities holders, their ownership size, and the emissions of owned firms. In particular, transition risk has been taken up by less regulated financial institutions and the BRIC countries. Our results highlight that the redirection of global financial flows towards climate action requires clear and unanimous signals from the global community of policy makers. [ABSTRACT FROM AUTHOR]

We investigate whether and how the systemic risk of European banks and insurers is sensitive to the ESG performance of non financial companies. We adopt a market-based approach and measure the former through the delta conditional Value at Risk of the banking and insurance sectors, whereas the latter is given by a series of market indexes built to account for both the overall ESG commitment and the compliance to each single pillar of the ESG paradigm. By analyzing the period January 2016 – July 2022, we observe that a better performance of green and ESG complaint companies, which turns out in a raise in the level of the respective indexes, reduces systemic risk more than brown and market ones, respectively. The opposite occurs in the case of an increase in their riskiness in terms of Value at Risk and Expected Shortfall. Banks appear to be systemically more vulnerable to green companies' riskiness; insurers seem to be more exposed to the riskiness of firms active in the oil & gas industry. The breakdown of the overall ESG scores into E, S and G ones allows to observe that the channels through which sustainability performance of non-financial firms affects banks' and insurers' systemic risk are different and that further research is required on this regard. Overall, our findings are important in the perspective of the likely increase in the exposure of financial firms towards more ESG compliant companies, providing useful insights for financial institutions and supervisory agencies in the perspective of the integration of ESG factors in the risk management systems of the former and in the prudential practices of the latter. [Display omitted] • Implications of green and brown companies in the transition process towards a more sustainable economy. • Impact of ESG scores on financial systemic risk. • Break-down of the different impact of the individual pillars E, S and G. • Use of CoVar and MES methodology to measure financial systemic risk. [ABSTRACT FROM AUTHOR]

ESG and FinTech issues are gaining popularity, as evidenced by the increase in the number of works on these topics, especially over the last decade, but there is still a need to better understand the relationships, connections and overlaps between these research areas. This paper pursues these goals by exploring the evolution of the academic literature revolving around the linkages between FinTech innovations and ESG through a bibliometric perspective. The study sheds light on the conceptual structure within both these research domains and on their interplay, identifying and discussing five research clusters: 1. finance, Industry 4.0, CSR, and the SDGs; 2. FinTech, ESG performance, and corporate strategy; 3. ESG, artificial intelligence, and ESG reporting; 4. machine learning, stock markets, and sustainable investing; and 5. Internet of Things, blockchain technologies, and sustainable development. Finally, the article concludes with a discussion regarding future research challenges, opportunities, and directions. [Display omitted] • The work explores the research on ESG and FinTech through a bibliometric perspective. • The analysis identifies five major research clusters. • The research field of FinTech and ESG is still in its infancy. • The analysis provides a representation of the ESG and FinTech research landscape. • The study highlights new research challenges, opportunities, and directions. [ABSTRACT FROM AUTHOR]

The shift towards cleaner fuels from hydrocarbons has influenced nearly all market types and asset classes, and cryptocurrencies are no exception. The complex mechanism of blockchain and mining consumes high levels of electricity and surges environmental footprints in electronic waste generation. Existing studies that examine green and sustainable investments are limited to sustainable equities or green bonds; therefore, this study opens up a new research direction by considering green (energy-efficient) cryptocurrencies. First, this study develops a four-step screening process to systematically select cryptocurrencies that are greener than others. A comprehensive set of green and non-green assets and a battery of empirical tests are then employed to examine the diversification benefits of selected green cryptocurrencies against several well-diversified equity portfolios at the global, regional, and country levels. The diversification benefits of green cryptocurrencies are compared with non-green cryptocurrencies using (i) the four-moment modified value at risk and conditional value at risk, (ii) four different portfolio optimization strategies, and (iii) dynamic correlation-based hedge and safe-haven regression analyses. The results show that green cryptocurrencies provide diversification benefits that are at least comparable to, and in some cases, superior to, non-green (energy-intensive) cryptocurrencies. Cardano and Tezos are identified as green cryptocurrencies offering the most diversification benefits to investors, followed by EOS, Steller, and IOTA. This study provides valuable insights to investors and policymakers, specifically those concerned with achieving sustainability and ESG-compliance (environmental-social-governance) goals and seeking green assets to hedge and diversify various traditional investments. [Display omitted] • A novel four-step selection procedure is proposed to identify and select green cryptocurrencies. • Cardano, EOSIO, MIOTA, Steller, and Tezos are identified as greener than other cryptocurrencies. • The diversification benefit of green cryptocurrencies for several equity portfolios is examined. • Downside risk, portfolio optimizations, and DCC-GARCH-based hedge and safe-haven hypotheses are assessed. • Cardano and Tezos, among green cryptocurrencies, provide the most diversification benefits. [ABSTRACT FROM AUTHOR]

Widely regarded as an efficient source to finance innovative activities and sustainable growth, venture capital has achieved a remarkable development since the 1980s. By employing a unique city-level panel dataset, this study first illustrates the locational dynamics of venture capital investment in China, while empirically investigating major socio-economic drivers of China's venture capital activities. We find non-trivial spatial spillovers of venture capital activities featured by regional imbalance, and identify government intervention, exit opportunity, human capital accumulation, new invention and transport infrastructure as five major influential factors for the formation and evolvement of local venture capital activities. Finally, we show the critical role of international venture capital and domestic institutional factors in shaping the venture capital industry in China. The study deepens the understanding of distributional and operational patterns on China's venture capital market, and raises multiple implications for entrepreneurs and policy makers on the efficient planning of venture capital activities in large developing economies. Image 1 • Venture capital activities in China are spatially dependent featured by regional imbalance. • Venture capital activities in China are jointly driven by government interventions and market forces. • International venture capital investment promotes the development of domestic venture capital industry. • Determinants of venture capital activities possess stronger effects in coastal regions relative to inland regions. • Venture capital as a form of sustainable finance affects innovation and cleaner production. [ABSTRACT FROM AUTHOR]

• We test whether including green ETFs improves the overall performance of optimal portfolios out-of-sample. • The inclusion of green assets improves the sharpe ratios of portfolios. • Our findings are robust to the incorporation of transaction costs and removal of the COVID-19 period. • The probability of outperformance is higher for long-horizon investors. We test whether the inclusion of green asset ETFs in portfolios yields better outcomes for investors. We use a mean-variance optimization framework to construct optimal portfolios with and without green assets and compare their performance over different time horizons and market conditions. Our results show that the portfolios that combine green assets with other broader market indices generate higher returns and Sharpe ratios compared to benchmark portfolios. These results survive the incorporation of transaction costs and removal of the COVID-19 period from the sample. Further, we find that the probability of outperforming the benchmark is much higher for long-horizon investors in green asset portfolios. [ABSTRACT FROM AUTHOR]

Scope 3 greenhouse gas (GHG) emissions are frequently the most relevant element of a company's total emissions since they account for more than eighty percent. However, they are difficult to calculate since many stakeholders in the value chain are involved and emission data are usually not shared among them. Sustainable finance could provide a link to this discussion by providing data, digital data infrastructures and evaluation instruments. However, the existing research today is either limited to analyzing the levels of scope 3 emissions or to calculating them based on different measurement methods. How to implement scope 3 emissions reporting by solving the data sharing challenge remains mainly unexplored. This paper aims to close this gap by developing an approach, which chooses sustainable finance as a connecting element that (1) combines different calculation methods, (2) integrates cross-value chain data from different stakeholders and (3) combines primary and secondary data in a single model. The approach was developed in a prototype that uses real world data from collaboration with the UN-convened Net-Zero Asset Owner Alliance to evaluate its applicability. The findings of the prototype indicate that a digital data infrastructure can improve the calculation of scope 3 GHG emissions by improving data availability, accessibility and reliability and at the same time shows that the calculations are only as good as the data, which fuels this calculation. With this, the paper contributes to the theoretical and practical discussion about scope 3 GHG emission data. [ABSTRACT FROM AUTHOR]

Climate change and implementation of the European Green Deal have raised the demand for ecologically friendly financial products and green finance, particularly fixed-income instruments such as green bonds. Given the scarcity of research on the simultaneous effects of market and accounting-based characteristics when combined with green business innovation ability, the purpose of this study is to determine whether market-based and firm accounting variables, as well as environmental technological innovation, play a role in the decision to issue green bonds. Four Limited Dependent Variable models are used, and the results show that market size and market liquidity are the most important predictors of green bond issuance, with proportionate positive and negative effects. Green bond issuance is also impacted by the size factor and environmental technological innovation. Because assets and capitalization are used as collateral when issuing green debt, the current empirical findings demonstrate that size is an essential component in market accounting features other than green bonds, which portray themselves as a hedge market to stock market liquidity. Environmental technological innovation drives green bond issuance because it acts as a market signalling mechanism for a socially responsible company strategy, providing critical information to decision-makers, managers, and investors. [ABSTRACT FROM AUTHOR]

Highlights • Financial capital plays a key role in economic activities around the world, as well as in efforts to avoid climate change. • We develop a methodology that link financial actors to industries modifying tipping elements in Earth's climate system. • We identify "Financial Giants" who through their ownership have considerable influence over climate stability. • We assess the incentives of "Financial Giants" to collaborate and use their influence to help stabilize tipping elements. Abstract Financial actors and capital play a key role in extractive economic activities around the world, as well as in current efforts to avoid dangerous climate change. Here, in contrast to standard approaches in finance, sustainability and climate change, we elaborate in what ways financial actors affect key biomes around the world, and through this known "tipping elements" in the Earth system. We combine Earth system and sustainability sciences with corporate finance to develop a methodology that allows us to link financial actors to economic activities modifying biomes of key importance for stabilizing Earth's climate system. Our analysis of key owners of companies operating in the Amazon rainforest (Brazil) and boreal forests (Russia and Canada) identifies a small set of international financial actors with considerable, but as of yet unrealized, globally spanning influence. We denote these "Financial Giants", and elaborate how incentives and disincentives currently influence their potential to bolster or undermine the stability of the Earth's climate system. [ABSTRACT FROM AUTHOR]

Financing sustainable urban development has become a major issue, especially in Asian countries where the size and scale of construction efforts are vast. Shenzhen International Low Carbon City (ILCC) is a demonstration project of the China-EU Partnership on Sustainable Urbanization (CEUPSU) and an intriguing example for understanding innovative forms of funding with the specific aim to do this in environmentally, socially and economically sustainable ways. This article examines which financial vehicles are utilized in ILCC, in what way these contribute to sustainability and which implications the lessons drawn from it have for other eco and low carbon cities in China and elsewhere. The authors find that Urban Investment and Finance Platforms and Public-Private-Partnerships (PPPs) in a broader context are the two financial vehicles ILCC uses. A broad approach to PPPs is chosen in which stakeholder involvement is key and social conflicts are avoided by balancing the interests of various stakeholders. In particular, planning the village area as a whole and arranging finance through ‘metro + property’ provide a replicable and operable example for other cities in funding urban renewal and community transformation and dealing with the issue how residents can share the benefits of urban development with developers. The combination of these financial arrangements facilitates ILCC to achieve the triple bottom line in sustainable urbanization. ILCC is environmentally sustainable by promoting low carbon transition, socially sustainable through resident and villager involvement, and financially sustainable through diversification of funding sources. The financing experience gained from ILCC provides practical lessons for other cities and has significant implications in adapting institutional and organizational arrangements to create enabling conditions for innovative financing activities. [ABSTRACT FROM AUTHOR]

Sustainable business model innovation is increasingly viewed as a lever for systems change for sustainability across businesses and industries. Banks hold a unique intermediary role in sustainable development, but also have a difficult position after the 2008 financial crisis. This paper aims to explore business models for sustainability in the service industry, particularly banking. It explores the receptiveness of customers towards sustainable business models pursued by banks. The retail banking industry in Hong Kong is the focus of this work. First, a practice review and semi-structured interviews are used to develop and validate a set of sustainable business model archetypes for the banking industry. Second, surveys are conducted to test customer receptiveness for the archetypes. Eight sustainable business model archetypes for banking are developed and validated. “Substitute with digital processes”, “adopt a stewardship role” and “encourage sufficiency” are most welcomed by customers. Some archetypes seem at direct odds with current business practice, such as “encourage sufficiency”. This study gives an insight to how to “do good and do well” in the banking industry. Further research on the attributes of these archetypes can be conducted to gain a deeper understanding why customers prefer banks to use these archetypes. [ABSTRACT FROM AUTHOR]

Indirect greenhouse gas (GHG) emissions (scope 3) generally represent more than half of the total life cycle impact attributable to a company or an investment. However, widely used sustainability assessment tools for investment funds fail to take these into account. Building on best practices from the industrial ecology field, we develop an input-output life cycle assessment (IOLCA) methodology to estimate life cycle GHG emissions of companies and investment funds. We apply our method to a sample of 1340 sustainable (SRI) and conventional equity funds domiciled in Europe and their 11,275 unique holdings. We extend our application to a case study of funds self-classified as Article 8 and Article 9 funds under the recent European Sustainable Finance Disclosure Regulation (SFDR, 2019). Our model estimates life cycle emissions for 94% of the companies held – compared to 17% coverage in the Carbon Disclosure Project (CDP). When including scope 3, the exposure to GHG emissions of both SRI and conventional funds is two to three times larger than when considering only direct impacts from holdings' operations. Finally, 24% of the sampled Europe-domiciled SRI funds are more exposed to life cycle carbon emissions than the ETF tracking the conventional market index MSCI Europe. • Input-Output data can be consistently used to estimate fund-level life cycle greenhouse gas (GHG) emissions. • SRI funds are exposed to carbon-intensive companies. • Indirect GHG emissions represent more than half of an investment fund's exposure. [ABSTRACT FROM AUTHOR]

We find that dividend paying firms demonstrate superior corporate social responsibility (CSR) performance in the subsequent year than non-paying firms. This effect can be explained by stakeholder relationship management through CSR, as dividend payout reflects the inherent conflict between shareholders and stakeholders. Specifically, for dividend payers, we find an increase in CSR performance after states adopt constituency statutes which encourage board's attention on stakeholders, supporting a causal inference of the stakeholder relationship management's effect on CSR. The increase in dividend payers' CSR around the constituency statute adoption is more pronounced when management is friendlier to CSR, which lends further support for the stakeholder relationship management channel. We find no support for the short-termism view of dividends or the notion that CSR is solely an outcome of agency problems within firms. In conclusion, our findings suggest that dividend payout serves as a mechanism for balancing shareholder and stakeholder interests, leading to improved CSR performance among dividend-paying firms. [ABSTRACT FROM AUTHOR]

• This study investigates whether investor attention toward the sustainable finance disclosure regulation (SFDR) leads European financial markets during the years 2019–2022. • To identify the investor attention towards the SFDR we use the Google search volume index. • Results suggest investor attention has a strong predictive power on the financial markets, mostly during bearish and normal market conditions. • The sensitivity at lower-middle quantiles suggests that regulation may mostly affect financial markets when other negative conditions occur (e.g., geopolitical uncertainty or pandemic emergency). This study investigates whether investor attention to the Sustainable Finance Disclosure Regulation (SFDR) leads European financial markets during the years 2019–2022. Using the nonparametric causality-in-quantiles method, results suggest investor attention has a strong predictive power on the financial markets, mostly during bearish and normal market conditions. Findings are robust to several alternative tests. Our research contributes to the literature on the link between investor attention and financial markets, and on the sustainable finance research stream, with relevant implications for asset managers. [ABSTRACT FROM AUTHOR]

Marine Protected Areas (MPAs) are globally underfunded. We present a five-step framework that can help practitioners prioritize actions that may improve financial sustainability, which was applied to six MPAs in Colombia, Bonaire, and Belize. Limited funds were found to directly undermine effectiveness towards conservation goals for five sites, with these impacts particularly significant for four. Annual budgets required increases from 6 % to 141 % to meet financial needs. Two sites had significant underlying weaknesses in their financial strategies that could lead to direct impacts if not addressed, with an additional three sites having more minor, but still observable, weaknesses in this manner. Staff salaries were the largest expense for all MPAs examined and also most frequently in need of additional funds. Opportunities to potentially eliminate these funding gaps were identified for all six MPAs through reallocating existing resources (n = 2), improving in-place mechanisms (n = 6), or implementing one or more alternative mechanisms (n = 6). Among several findings, some MPAs had the potential to increase tourism-based income by several million dollars per year, which would well exceed local financial requirements and could have substantial financial benefits on a network-wide scale. Some MPAs, including those with lower budgets, effectively leveraged partnerships and inter-institutional coordination to expand management capacity. Among alternative mechanisms that could be implemented, opportunities to leverage private-sector investments were especially common. Other MPAs around the world could likewise improve financial sustainability through analysis, evaluation, and execution of the full suite of options described herein. [ABSTRACT FROM AUTHOR]

• In this article, we study the relationship between ESG rating upgrades and downgrades and short-term stock performance following the methodology laid out in Shanaev and Ghimire (2022). • We contribute to the literature by correcting several methodological mistakes in the original Shanaev and Ghimire (2022) study and by addressing the issue of ESG rating heterogeneity when examining short-term stock performance. • Using ESG ratings from MSCI ESG and Vigeo Eiris, we do not find evidence that ESG rating changes are related to short-term stock performance in contrast to Shanaev and Ghimire (2022). Environmental, social and governance (ESG) ratings are mainstream in sustainable finance. This paper provides important evidence on the effects of ESG rating changes on companies' stock performance. We contribute to the ESG rating change literature by replicating the calendar-time portfolio analysis for US stocks from Shanaev and Ghimire (2022), which found economically significant results. We find contradictory results, which are robust to the omnipresent rating heterogeneity problem. More precisely, we find that rating changes do not significantly affect stock performance in the short-term. Four methodological mistakes in the original study explain the differences in the results. [ABSTRACT FROM AUTHOR]

We study the relationship between climate change and financial systemic risk. First, we test whether, to what extent and how quickly the systemic risk of US banking and insurance sectors reacts to billion-dollar weather and climate disasters. We prove that some extreme events can exacerbate financial systemic risk and provide insights about the different timing at which the reaction of the systemic risk measures takes place. Second, we investigate through quantile regressions how the performance of green and brown market indexes affects the systemic risk of the two US financial sectors. We observe that higher levels of the green indexes reduce systemic risk more than a raise in brown indexes, with an increasing magnitude in tail conditions. A raise in the riskiness of the green indexes seems to significantly increase systemic risk, with the effect being stronger than that of an increase in the riskiness of brown indexes. Our results confirm the importance of the adoption of appropriate policies aiming at contrasting the raise in the frequency and severity of climate disasters. Our findings are also important in the perspective of the likely increase (decrease) in the exposure of financial firms towards green (brown) companies, induced by the policy decisions taken to combat climate change, and in terms of the implications for banks' and insurers' risk management models and procedures. • Billion-dollar climate disasters can increase financial systemic risk. • A raise in green indexes mitigates financial systemic risk more than brown indexes. • Riskiness of green indexes raises financial systemic risk more than brown indexes. • The magnitude of the difference of the above impacts increases in tail conditions. [ABSTRACT FROM AUTHOR]

This study seeks to examine whether corporate environmental performance (CEP) and corporate social performance (CSP) affect stability of the banking industry. The topic is of much interest to researchers and policy makers considering the growing demand to integrate environmental and social practices into banking business model. Based on a panel dataset of 473 banks in 74 countries, this research finds that CEP is negatively related to bank stability as measured by non-performing loans (NPL). However, the impact is insignificant for small and large banks, as well as for banks in countries with low environmental scores. Furthermore, CSP does not appear to have a significant relationship with bank stability, but financial product safety, which is an aspect of CSP, does. The results are robust to a variety of econometric specifications and have significant policy implications for investors, bankers and regulators. [Display omitted] • Corporate environmental performance is negatively related to bank stability. • The impact is insignificant for very small and very large banks. • The impact is insignificant for banks in countries with poor environmental scores. • No significant impact of corporate social performance on bank stability. • Financial product safety has a positive impact on bank stability. [ABSTRACT FROM AUTHOR]

More and more, the finance and the financial sector are used as a means of achieving social goals. Thus, the main financial market participants are required to change their ESG identity and to act no longer only as a seller of sustainable products, but also as sustainable actors themselves. For this purpose, banks and financial institutions are required to complement financial information with environmental, social, and governance (ESG) statements to provide a wider overview of the value creation process. Despite the banking sector being of utmost importance in the promotion of a transition towards sustainable economic development, the analysis of the attributes of their non-financial disclosure (NFD) has achieved little attention from scholars thus far. This paper aims at investigating the relationships between board composition and some textual attributes of NFDs by testing the incremental information vs. impression management approach in the Italian banking sector for the years 2017–2020, after the introduction of Directive (2014)/95/EU. The final sample is composed of 29 Italian banks. A two-step analysis was conducted. In the first stage, a content analysis was performed to assess the textual attributes of the disclosures, and in the second a multivariate regression model with panel data was run. Empirical findings found a significant impact of board composition and textual attributes on conciseness, completeness, positive tone, and the reading difficulty of NFDs. Results from this study contribute to the literature on disclosure strategies and theories by providing additional knowledge on the role of certain characteristics of corporate governance in explaining some textual attributes of NFDs in the financial sector. Managerial implications are related to the (re-)design of some governance features which are more suitable in providing a more transparent and comparable NFD. Policy implications are related to the development of policies and regulations at the international level that combine high-quality sustainability-related information and the governance features of financial institutions. • Board composition impacts textual attributes of the non-financial disclosures (NFDs) of banks. • The participation of women in the board of Italian banks mirrors less complete, readable, and balanced NFDs. • The increase over time of women on the board enhances bank NFD completeness. • Smaller boards of directors are associated with higher completeness of bank NFDs. [ABSTRACT FROM AUTHOR]

The financial industry has developed a wide breadth of instruments to support the growing number of firms interested in socially responsible, or "sustainable", investing. The use of the most well-known, green bonds, is generally limited to investments defined by the Green Bond Principles. However, more flexible sustainability-linked loans (SLLs) have skyrocketed in importance recently. In 2021, they became the largest corporate debt type including a sustainable feature, raising USD 735 billion globally. Existing evidence on the potential lower yields of green bonds, also known as the greenium, supports their attractiveness from a borrower's perspective. Contrary to this evidence, however, little is yet known about the financial attractiveness of SLLs. We address this research gap, and provide new findings on the yields of sustainability-linked loan financing. We study 121 SLLs originated in 2021, and compare them to peers of matched conventional loans featuring similar characteristics. We find that SLLs are associated with lower initial yields for borrowers. This benefit is more pronounced for borrowers with strong environmental profiles, and for loan originations conducted using a lender syndicate with high environmental standards. The financial benefits, coupled with their flexible structure, suggest that SLLs can be an attractive tool for companies from a variety of sectors to use in managing sustainable business transformations and addressing the challenges of climate change. • Sustainability-Linked Loans broaden sector participation in sustainable debt market. • Sustainability-Linked Loans come with lower initial spreads for borrowers. • Spread discount is higher for borrowers with high environmental profiles. • Spread discount is higher if lender syndicate has high environmental profile. • Spread discount is higher for lender syndicates with low governance profiles. [ABSTRACT FROM AUTHOR]

The past decade has seen an increasing interest in socially responsible investing (SRI) in the mutual fund industry. Central to this development is whether SRI funds underperform conventional funds. Using a novel approach and a sample of 2,255 mutual funds, we decompose fund portfolios into socially responsible (green) and non-socially responsible (brown) components. We find that, in comparison to the non-socially responsible component, the socially responsible portion exhibits a lower raw return, lower risk-adjusted return (alpha), lower Sharpe ratio, and similar degree of performance reversal. The magnitude of this underperformance is, however, relatively small. The results align with SRI having a limited negative impact on fund performance while potentially offering some diversification benefits. [ABSTRACT FROM AUTHOR]

Sustainable finance and blockchain studies have garnered considerable interest recently. but there has been no systematic analysis of blockchain in sustainable finance to far. To fill this gap, based on the theme structure of blockchain research in the field of renewable finance from November 1, 2008 to January 31, 2022, this paper proposes a multi-level and all-round comprehensive bibliometric method (Co-occurrence Analysis method, Natural Language Processing method, and Exploratory Factor Analysis method) to comprehend the mode, process, and mechanism of the integration of them. The findings indicate that: (1) Blockchain has been widely used in many industries involved in sustainable finance; (2) Blockchain will have a long-term impact on Sustainable Finance in the fields of smart city and sharing economy; (3) Blockchain can be deeply integrated with other technologies to promote the diversified development of sustainable finance. Additionally, we highlight trends and research directions regarding blockchain in sustainable finance research. [Display omitted] • We use multiple analysis methods based on machine learning and data visualization. • We provide a scientometrics review of blockchain research in sustainable finance. • Blockchain has been achieved significant impacts on multiple aspects of sustainable finance. • Blockchain will merge sophisticated technologies and improve sustainable finance solutions. [ABSTRACT FROM AUTHOR]

Crowdlending for sustainable new ventures is situated between traditional investing and charitable giving, thereby attracting non-professional investors with different motivations. However, the current understanding of these different motivations related to crowdlending decisions is limited. Drawing on the theory of basic human values, the present article addresses the question of whether and how crowd investors differ regarding the factors that drive their crowdlending decisions for sustainable new ventures. Using a choice-based conjoint analysis followed by a latent class analysis, this study explores the preferences of 353 non-professional investors in response to project attributes associated with loan characteristics and sustainability impact goals. The results reveal four crowd investor segments with heterogeneous preference structures and highlight the role of human values to identify such segments. While the majority of crowd investors form their decisions around financial return rates, the segment of crowd investors characterized by high self-transcendence and low self-enhancement values focuses primarily on ecological impact goals. Surprisingly, crowd investors who prefer social over ecological impact goals are characterized by high self-enhancement values and thus appear to be motivated by self-interest. These insights are significant for sustainable entrepreneurs and platforms, helping them to better address the diverse audience in crowdlending. [ABSTRACT FROM AUTHOR]

Amid funding shortfalls to address ongoing ocean degradation, blue bonds are being designed to finance sustainable development and conservation projects in ocean and coastal areas via private sector investment. Blue bonds seek to deliver both positive environmental and/or social impact alongside a financial return on investment to investors. However, there has been limited academic scrutiny of these early initiatives to evaluate whether this rhetoric is justified. This article leverages 15-years of scholarship on green bonds to develop an analytical framework that is applied to five of the world's first blue bonds. A comprehensive content analysis of sources such as blue bond project documents and secondary interviews is used to synthesise their characteristics, and consider trends related to their thematic scope, geographical scope, environmental impacts, and financial returns. Thematically, blue bond proceeds are channelled towards projects aligned with Sustainable Development Goal (SDG) 14 'Life Below Water', the Blue Economy, and policy discourse around the 'blue recovery' from covid-19. These projects range from marine protected area (MPA) creation, to improved fisheries management, and potentially, oil and gas exploration. However, greater explanation of the logic through which project activities are expected to deliver impact and returns is warranted. Equally, impact measurement is often underwhelming, with many bonds targeting easy-to-measure outputs (e.g., area conserved) rather than outcomes and impacts (e.g., increases in fish abundance). While an alluring and useful financial innovation, greater disclosure on the individual projects and enterprises that blue bonds finance is necessary to validate their sustainability credentials and inform investor decision making. [ABSTRACT FROM AUTHOR]

Driving and monitoring the transition toward a sustainable economy requires sound environmental and social indicators. In this paper we outline the 'Green Investment Financial Tool' (GIFT), an approach developed within a pilot project of the Italian government to assess the environmental performance of investments through quantitative indicators defined based on system thinking and life cycle assessment, while pursuing the fulfilment of the "Do No Significant Harm" principle (i.e., no step back in the six environmental objectives set in the EU taxonomy for sustainable activities) as well as social safeguard requirements. We explain how the GIFT can be applied to small and medium business investments without creating competitive barriers associated with high cost of implementation. We also discuss how the approach could be potentially used in support of policy applications (e.g., enhancing green private investments, issuing green government bonds), when defining improvement objectives aligned with the EU taxonomy, and its implications for knowledge creation (monitoring and accounting). Finally, research orientations for potential future developments of the approach are addressed. • A life cycle approach for the environmental assessment of investments is developed. • The approach bridges a research gap in monitoring ecological transition. • Life-cycle based KPIs are introduced across the 6 objectives of the EU taxonomy. • Investments are assessed against a counterfactual and must fulfil DNSH principle. • Potential applications and further developments of the approach are described. [ABSTRACT FROM AUTHOR]

The concept of "Green Finance" (GF) has evolved over a period of time in accordance with the aspirations of the economies. Growing global concern towards environment protection, climate change mitigation and adaptation has directed the attention of academic researchers and policymakers towards GF, which is an initiative of economies for innovative and sustainable transition on their financial systems. The present study aims to conduct a bibliometric analysis for exploring the growth and academic evolution of GF concept. The academic literature is surveyed from the Scopus database during the period 1997–2021 (February). The intellectual structure and bibliographic analysis of the selected articles is done using VoS Viewer and Bibliometrix R Package. Several inclusion and exclusion criteria is applied to ensure precision in the results obtained. The study has also attempted to identify the enablers of GF by reviewing articles published during the period 2018–2021(February). The identified enablers are classified into 10 broad parameters namely; macroeconomic enablers, development of regulatory structure, making investment environment conducive, capacity building, increase in the levels and forms institutional engagement, technology and technological advancements, financial instruments, financial policies and regulations, well-developed capital market and supportive political environment. This study is one of the preliminary attempts to study the growth and evolution of GF and its enablers. It thus contributes to the literature on GF and provides scope of further research in the given field. • Green finance (GF) is innovation in financial industry and aims to support transition to green economy. • GF aims to finance activities related to environment protection, climate mitigation and adaptation. • GF is in a nascent stage in developing countries. • Green bonds are the most popular tool adopted for green financing. • The enablers of GF can be categorised into 10 broad parameters. [ABSTRACT FROM AUTHOR]

This article studies how institutional dynamics might affect and be affected by the implementation of climate-related financial policies. First, we propose a three-dimensional framework to distinguish: i) motives for policy implementation (prudential or promotional); ii) policy instruments (informational, incentive-based or quantity-based); and iii) implementing authorities (political or delegated). Second, we use this framework to show how sustainable financial interventions in certain jurisdictions - most notably, Europe - rely predominantly on informational policy instruments to achieve both promotional and prudential objectives. Policymakers in other jurisdictions - e.g. China - also employ incentive- or quantity-based instruments to achieve promotional objectives. Third, we identify two main institutional explanations for this European 'promotional gap': i) a reduced intervention of political authorities on the allocation of financial resources; and ii) a stronger independence of technical delegated authorities supervising financial dynamics. This governance configuration leads to an institutional deadlock in which only measures fitting with both political and delegated authorities' objectives can be implemented. Finally, we identify and discuss the possible institutional scenarios that could originate from the current setting, and stress the need for close cooperation between political and delegated authorities. [ABSTRACT FROM AUTHOR]

• There is a unidirectional relationship between firm default risk and CSR as well as the environment dimension. • Firm stability contributes to the implementation of a sustainable development approach in African firms. • Environmental performance has negative and significant impact toward firm stability. • There is a virtuous circle between governance dimension and firms' stability. • Good governance enhances firms' stability and thereby strengthen their engagement to good governance practices. As far we know this study is the first to examine the causal relationship between African firm default risk and CSR and its separate dimensions (environmental, social, and governance dimensions). Bivariate PVAR estimations results show that there is a unidirectional relationship between firm default risk and CSR as well as the environment dimension. Indeed, we note a positive and significant impact of firm stability toward CSR. Besides, our results reveal that environmental performance has a negative and significant impact on firm stability. Finally, our findings conclude that there is a virtuous circle between the governance dimension and firms' stability. [ABSTRACT FROM AUTHOR]