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Sustainable finance 'thought leaders' call for metrics as the key to aligning investment with sustainability objectives and harnessing the market for 'good'. In this article, we consider how measurement is used in sustainable finance through three case studies of financial instruments described as bonds (green, forest, and impact) and develop Sally Engle Merry's concept of 'indicator literacy' as a contribution to critical geographies of sustainable finance. Through ethnography, we explore how labelling financial products as sustainable (and therefore moral) increasingly relies on claims to achieve measurable outcomes and how attention to spatial and scalar dynamics illuminates what this leaves out. [ABSTRACT FROM AUTHOR]

Research Question/Issue: We examine the effect of multiple environmental, social, and governance (ESG) scores on institutional investor ownership of firms and investor portfolio weightings. We are also the first to analyze the three individual components of ESG rankings to estimate the relative preferences of institutional investors. Research Findings/Insights: Using a unique panel dataset covering US companies and institutional investor portfolios over the 2010–2019 period, we find that while investors are driven to add high‐quality ESG companies to their portfolios, there is a negative relationship with ESG when it comes to taking large ownership stakes. Furthermore, ESG scores are negatively related to the portfolio weightings of institutional investors, which raises concerns of greenwashing. Our analysis of individual ESG scores points to significantly larger effects of G scores in terms of holdings, and G is the only score with no negative impact on portfolio weightings. Finally, in support of systematic stewardship theory, top institutional investors allocate higher proportions of their portfolios to firms with high‐ESG ratings. Our results are robust to the use of a difference‐in‐differences analysis addressing endogeneity concerns. Theoretical/Academic Implications: The findings in this paper offer important policy implications for institutional investors, managers, and policymakers. Given the ongoing debate on ESG scores, this paper shows the importance of examining greenwashing for investors who have a concern regarding the extent to which the valuation of assets might be influenced by unsupported sustainability claims. In addition, our study adds to the debate regarding ESG investing and stewardship theory. [ABSTRACT FROM AUTHOR]

Sustainability concerns are increasingly shaping global investment decisions, prioritising sustainable impacts over mere profit-making. This study examines the performance of Environmental, Social, and Governance (ESG) funds in emerging markets, focusing on bull and bear market scenarios. A Markov Regime Switching model was employed to analyse daily price data from BRICS (Brazil, Russia, India, China, and South Africa) ESG market indices spanning from 31 January 2011 to 2 January 2023. The analysis highlights the variability of ESG returns performance across different market conditions, emphasising the need for tailored investment strategies that account for market dynamics. Additionally, patterns in ESG returns and volatility are identified, along with pairwise relationships among ESG markets within the emerging markets bloc. The study also examines the influence of investor sentiments on ESG performance and controlled for the influence of macroeconomic factors on ESG performance amid changing market conditions. Finally, insights into transition probabilities between bullish and bearish market conditions offer guidance for more resilient investment portfolio management. This research contributes to advancing empirical knowledge on ESG investing in emerging markets, emphasising the significance of investor sentiments and market conditions for sustainable investment practices and long-term financial success. [ABSTRACT FROM AUTHOR]

As the global financial ecosystem undergoes a paradigm shift toward sustainability, platforms emerge as instrumental intermediaries, connecting diverse stakeholders, facilitating information flow, and catalyzing impactful investments. This paper analyses the evolving landscape of sustainable finance and investigates the role of platforms in fostering its growth. Sustainable finance platform-based enablers were determined using a systematic literature review and bibliometric techniques on a sample of papers retrieved from the SCOPUS database, and included crowdfunding platforms, impact investment platforms, peer-to-peer (P2P) lending platforms, blockchain-based financing platforms, and ESG data platforms. The analysis showed that platform-based solutions act as accelerators of sustainable finance mobilization, by enhancing transparency of the processes, and by improving dissemination and accessibility of the funds needed. Thus, platform-based solutions help a broader set of stakeholders direct the potential of platforms to accelerate the transition toward a more sustainable and inclusive global financial system. [ABSTRACT FROM AUTHOR]

Purpose: There is an increasing awareness of environmental, social and governance (ESG) factors in the private equity (PE) environment. While many studies deal with the implementation of ESG in the field of PE, only little is known about how the subcategory venture capital. Therefore, this study aims to answer the questions: What are the motivations for venture capitalists to consider ESG in their investment decisions? How do they implement it and what are the barriers that hinder them? Design/methodology/approach: An inductive study based on semi-structured interviews with 11 investors of venture capital firms (VCs) was conducted to explore the drivers, the barriers and the strategies to implement ESG in the investment decision-making. Findings: All investors perceive that ESG will play a major role in investment decisions in the long term. VCs have seen benefits primarily in terms of performance and commercialization of startups that incorporate the ESG aspect. Limited partners are a driving force for change in this process. No standardized framework and lack of resources for implementation are mainly assumed as barriers. Practical implications: Politics and industry might support particularly smaller VCs in their implementation by providing standardized frameworks. Owing to increasing awareness and interest of ESG criteria among VCs, startups should also address these criteria. Originality/value: This paper contributes to the literature by examining how ESG is currently considered in VCs' decisions and what challenges they face. Therefore, this research contributes to the understanding of the decision-making process among venture capitalists. [ABSTRACT FROM AUTHOR]

This study attempts to explain the relationship between ESG and financial performance. It utilises a new method for constructing an ESG portfolio with a high exposure towards ESG that eliminates the inherent correlation between size and ESG. In that perspective, a zero initial investment portfolio that goes long in responsible companies and short in irresponsible companies is adopted; hence, developing a 'Responsible Minus Irresponsible' (RMI) factor mimicking portfolio. A pricing anomaly test on this portfolio suggests that ESG exerts superior financial performance, mostly as a result of a significant lower market risk. Performing a cross-sectional analysis of different factor models on an international set of company returns indicates a negative effect of ESG on expected returns. However, the ESG factor becomes insignificant once multiple factors are introduced as explanatory variables. Consequently, ESG represents a pricing anomaly but does not act as an independent risk factor. [ABSTRACT FROM AUTHOR]

This research examines the relationship between firms' corporate social performance (CSP) and the implied cost of equity capital using a sample of 25,938 firm‐year observation from 49 countries during the period from 2002 to 2021. Using estimates of the firms' ex ante cost of equity capital, we examine its relationship with industry‐relative measures of the firms' CSP, its environmental and social pillars and sub‐pillars. We find that increased overall CSP reduces a firm's cost of equity capital up until a point, beyond which the marginal benefits of further CSP investment decrease. We find that the social pillar is the main driver of the reductions in cost of capital, in particular, a firm's performance in relation to its workforce, and that higher performance is increasingly rewarded with a lower cost of capital. Finally, we find that this relationship differs depending on the institutional context, with greater reductions in the cost of capital evident in countries with stronger institutional environments. [ABSTRACT FROM AUTHOR]

Socially Responsible Investments (SRI) have recently generated much interest among asset owners, managers and academicians. Though the Efficient Market Theory suggests that stock prices fully reflect all available information, few existing studies indicate that Environmental, Social and Governance (ESG) portfolios deliver superior risk‐adjusted performance. ESG investing is at a nascent stage in India but is growing rapidly, especially after the COVID‐19 pandemic. Asset managers always face the dilemma of choosing between different screening methods, screening intensities and stock weighting schemes to deliver outperformance. Our study attempts to investigate the impact of these portfolio construction criteria on the risk‐adjusted performance of ESG portfolios in India. Our results show that there exists a trade‐off between superior investment performance and unsystematic risk of ESG portfolios. Investors can benefit from investing in equally‐weighted best‐in‐class portfolios constructed using ESG scores. We highlight the implications of our findings for asset owners, managers, index providers and regulators, and also provide directions for future research in the area of ESG portfolio management. [ABSTRACT FROM AUTHOR]

Subject. Processes of internal institutionalisation and state regulation of the sustainable lending market in the agricultural sector, as well as the ESG transformation of business processes of lenders and borrowers within the framework of the concept of sustainable development. Objectives. The formation of a conceptual framework for sustainable lending and forecasting scenarios for its development in the agricultural sector; development of a model methodology providing a structural restructuring of the industry credit mechanism in terms of incorporating sustainable development goals and ESG factors into the credit procedures of banks and the business processes of borrowers, increasing the supply of relevant credit products, and creating a system of market and government incentives. Methodology. The developed model methodology for sustainable lending is based on the concepts of sustainable development, ESG, responsible banking, and sustainable finance. In order to achieve the objectives, the author used abstraction, generalisation, formalisation, analogies, and scenario forecasting methods. Results. It was shown that the concept of sustainable development and the principles of responsible banking form the basis of sustainable financing, the direction of which is sustainable lending. A conceptual apparatus of sustainable lending has been formed, which allows classifying it as a financial instrument for achieving sustainable development goals. Conclusions. Based on scenario forecasting, an acceleration model for the formation of a sustainable lending market in the agricultural sector is substantiated. The model assumes a proactive role of the state and banks (promotion of values, incentives), consolidation of institutional changes, and infrastructure development. A model methodology for sustainable lending in the agricultural sector, including three structural components: information, product and incentive system has been developed. The information component performs the functions of goal setting, consolidation in formal norms and regulation of institutional changes, incorporation of ESG factors into standard credit scoring procedures, and development of the market for non-financial ESG products. The product component is differentiated by types of sustainable development credit products. Standardised loan products, including government support measures, are offered for verified projects. For projects financed according to bank standards, unique loan products are offered with internal financial and non-financial incentives, restrictions and ESG risk management tools integrated into their structure. The incentive system is differentiated into financial and non-financial based on the types of credit products.

The incorporation of environmental, social and governance (ESG) factors into private investments is transitioning from a risk management strategy to a catalyst for innovation and novel prospects that benefits both business and society in the long run. The growing prominence of such investments necessitates a comprehensive assessment of their risk under varying market conditions. This research aims to provide a thorough analysis by examining the risk of ESG portfolios across global financial markets (categorised as developed and emerging) during distinct market regimes. The study utilises daily data of representative ESG equity portfolios from developed markets (US and Japan) as well as emerging markets (China and India). The portfolios are divided into sub-periods to accommodate the disparity between the Covid and post-Covid regimes. The study compares and contrasts the volatility patterns of all the ESG portfolios using a GJR-GARCH model that takes into consideration both the conditional variance and asymmetricity in the financial time series. Although the results reveal no clear distinction when comparing return and risk between developed and emerging markets, there is presence of varying performance across market regimes, with all the portfolios showing higher returns and lower risk during the Covid, reflecting dynamic market conditions. Additionally, the asymmetricity in volatility is more during Covid period as compared to the post-Covid period for all the portfolios. The findings provide valuable guidance to asset managers and investors seeking to mitigate portfolio risk by engaging in ESG investing. [ABSTRACT FROM AUTHOR]

Introduction: Greenwashing in sustainable finance involves misleading portrayals of investment products as environmentally friendly. This study explores the prevalence of greenwashing, its forms, impacts, and potential remedies. It underscores the need to align investor values with genuine environmental sustainability, emphasizing the pitfalls of greenwashing in sustainable finance. Methods: The study employs a scoping review methodology guided by the PRISMA (Preferred Reporting Items for Systematic Reviews and Meta-Analyses) framework. It involves systematically searching, selecting, and synthesizing evidence from various databases and sources to map critical concepts, types of evidence, and research gaps in greenwashing within sustainable finance. Results: The study reveals diverse greenwashing strategies across industries, including ambiguous language, irrelevant claims, and opacity. It highlights greenwashing's severe consequences on corporate reputation, financial performance, and stakeholder trust. The effectiveness of regulatory bodies, Non-Governmental Organizations, and certifications in curbing greenwashing is discussed, though their effectiveness is debatable. The research also examines greenwashing's impact on investor behavior and decision-making. Discussion: This research contributes to understanding greenwashing in sustainable finance, emphasizing vigilance, transparency, and accountability. It calls for more stringent regulations, international cooperation, and public awareness to combat greenwashing effectively. The study also suggests that businesses should adopt genuine and transparent environmental practices to avoid the risks of greenwashing, including legal repercussions. For future research, the study proposes a deeper exploration of the mechanisms enabling greenwashing and the effectiveness of different regulatory strategies and measures to combat it. [ABSTRACT FROM AUTHOR]

This study examines the performance of worldwide corporate sustainability bonds issued from 2014 to 2020. Unlike traditional bonds, the proceeds of sustainability bonds are utilised for financing projects to bring about environmental and socio‐economic benefits. We analyse the short‐term market reaction to announcements of sustainability and traditional bond issuance and document that the stock market reaction to an announcement of sustainability bonds is stronger than that for traditional bonds. We also find that multiple issuers of sustainability bonds achieve a more favourable market reaction than single issuers. Finally, we examine if environmental, social and governance (ESG) scores can positively and significantly impact the corporate performance of firms through the lens of sustainability bond issuances. We find that ESG scores are the primary performance drivers for firms, and the effect is more pronounced for firms that issue sustainability bonds. Overall, the results suggest that issuers of sustainability bonds show their commitment towards environmental and societal goals and thus benefit from favourable stock market reactions. [ABSTRACT FROM AUTHOR]

Copyright of Journal of Economic Research & Business Administration is the property of Al-Farabi Kazakh National University and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

This study delved into transition risk by introducing a novel Climate Transition Score to evaluate the climate-related performance of the most capitalized firms in the stock markets of developed countries. Then we classified these firms into green and brown portfolios. Our analysis demonstrates that high-emission or brown firms bear more risk than their green counterparts do, even if they do not consistently outperform them. To gauge exposure to transition risk, we employed asset pricing factor models such as CAPM, Fama and French 3-Factor, and Carhart's (1997) model. However, these models failed to provide a satisfactory explanation for portfolios' excess returns in their standard formulation. To address this gap, we introduced the Green Minus Brown risk factor. This addition enhanced the explanatory power of the models, emphasizing the heightened exposure of brown companies to transition risk. [ABSTRACT FROM AUTHOR]

Environmental, social, and governance (ESG) funds are among the fastest‐growing investment styles. ESG investing thereby has a governing effect, and a key open question is whether ESG merely reduces risks for investors or whether it can have a sustainability impact and actively contribute to climate transition. This governance through ESG is characterized by three potential transmission mechanisms: ratings, shareholder engagement, and capital allocation. These can create sustainability impact or constitute "ESG gaps" if transmission mechanisms remain ineffective/unutilized. Based on financial data, an investigation of ESG methodologies and expert interviews, we provide a novel ESG market analysis, focusing on the standard‐setting role of a handful of ESG index providers in capital allocation. Our findings highlight that while "Dark Green" indices could have an impact, currently "Broad ESG" indices, which do not meaningfully facilitate sustainability, dominate investing: we call this the "ESG capital allocation gap." This has important implications, because effective transmission mechanisms are crucial for ESG funds to achieve sustainability impact in the real economy. [ABSTRACT FROM AUTHOR]

The article analyzes the investment activity of sustainable institutional investors after the global financial and economic crisis of 2008. The relevance of the study is conditioned, firstly, by the leading positions of institutional investors in the global financial market and in the system of international finance; secondly, by the special role of mutual funds and ETFs in the global market of sustainable finance; thirdly, by the noticeable dynamics of investments by these market participants in recent years, which increasingly turns into divestments. The purpose of the study is to identify current trends in sustainable investment by global institutional investors and formulate their further actions in the short term. To do this, it is necessary to solve the following tasks: to clarify, taking into account the latest statistical data, the impact of the COVID-19 pandemic and other force majeure factors on the size and dynamics of the flow of funds of sustainable institutional investors in the leading countries of the world, and to assess the impact on investment prospects of current political and financial factors. In the course of the study, a significant amount of scientific research was analyzed, which served as a basis for identifying the institutional investors’ approaches to sustainable finance. It is concluded that the prospects for global sustainable investing are favorable due to the continued stimulation of environmental change at the supranational level, both in developed and leading developing countries. The financial success of sustainable investment will also contribute to this.

This study reveals the special role of finance related to the climate and energy transition, the effectiveness of which is evaluated by ESG criteria. The authors define the concept of "sustainable finance" as economic relations within the framework of purposeful formation of capital flows in accordance with ESG principles from public, corporate and private sources and their channeling to achieve the goals of sustainable development, energy transition and adaptation to climate change. It is established that the sustainable development policy implies a comprehensive achievement of goals and solving problems related to the energy transition and overcoming the consequences of climate change, without considering one without the other. The article reveals a connection between the strengthening of climate-related risk management and acceleration of energy consumption, which led to an increase in investor demand for reliable, comprehensive and comparable information. It also reveals significant contradictions between the global players of the global economy regarding the timing and forms of ensuring technological sovereignty and the special role of sustainable finance in achieving it, as well as the importance for Russia to follow global trends in the climate and energy transition. As a special segment of sustainable finance, the field of venture climate finance is developing quite rapidly, but this process is hampered by the lack of adequate information among venture investors about ESG in hightech startup companies and the specter of "black swans" in the financial markets.

Sustainability, green economy, ESG (environmental – social – governance) are the terms used interchangeably. They all represent an economy that enjoys sustainable growth and profitability while staying in line with ecological concerns. To reach the state of a sustainable profit, one of the most important achievements is decarbonisation according to the proponents of capitalism. As such, one of the most common paradigms for decarbonizing the planet is net zero -net zero greenhouse gas (GHG) emission-. Advocates of the sustainable economy claim that this goal can be reached by 2050. This article first discusses the net-zero paradigm and then provides a critique that emphasizes the antagonism between the two, i.e., between net-zero and capitalist economy and concludes that net-zero paradigm contradicts the very essence of the capital: profit and growth. [ABSTRACT FROM AUTHOR]

The debate around the public purpose of the corporation is not a new one. But it has flared up again recently due to widespread critique of deepening socio-economic inequality, corporate inequities regarding gender and race and the seeming inability of governments and businesses alike to adequately address the catastrophic impact of climate change. As the corporation holds a firmly established place in the universe of economic and financial affairs, it – like the markets in which it operates – is is typically depicted as a private affair. Any regulation of the corporation, thus, tends to be critiqued as an unjustified intervention into an economic sphere that should better be left to its own devices. This paper interrogates these claims against the historic evidence of corporate law’ and corporate theory’s trajectories throughout the twentieth century into the present. What this account teaches us is that the designation of ‘corporate purpose’ and our relation to it comes down to political choices. The reputational crisis of the corporation, then, is an opportunity for democratic deliberation and engagement. [ABSTRACT FROM AUTHOR]

IntroductionGreenwashing in sustainable finance involves misleading portrayals of investment products as environmentally friendly. This study explores the prevalence of greenwashing, its forms, impacts, and potential remedies. It underscores the need to align investor values with genuine environmental sustainability, emphasizing the pitfalls of greenwashing in sustainable finance.MethodsThe study employs a scoping review methodology guided by the PRISMA (Preferred Reporting Items for Systematic Reviews and Meta-Analyses) framework. It involves systematically searching, selecting, and synthesizing evidence from various databases and sources to map critical concepts, types of evidence, and research gaps in greenwashing within sustainable finance.ResultsThe study reveals diverse greenwashing strategies across industries, including ambiguous language, irrelevant claims, and opacity. It highlights greenwashing’s severe consequences on corporate reputation, financial performance, and stakeholder trust. The effectiveness of regulatory bodies, Non-Governmental Organizations, and certifications in curbing greenwashing is discussed, though their effectiveness is debatable. The research also examines greenwashing’s impact on investor behavior and decision-making.DiscussionThis research contributes to understanding greenwashing in sustainable finance, emphasizing vigilance, transparency, and accountability. It calls for more stringent regulations, international cooperation, and public awareness to combat greenwashing effectively. The study also suggests that businesses should adopt genuine and transparent environmental practices to avoid the risks of greenwashing, including legal repercussions. For future research, the study proposes a deeper exploration of the mechanisms enabling greenwashing and the effectiveness of different regulatory strategies and measures to combat it.

Copyright of Latin American Journal of Economic Developement (LAJED) is the property of Universidad Catolica Boliviana San Pablo and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Although issuances of sustainable debt are growing worldwide, there is a lack of studies that allow a better understanding the social bond issuances, particularly those with a gender focus, which are directly related to the achievement of the Sustainable Development Goals 5, 8, 9, and 10. This study addresses the identified knowledge gap by examining the overall state of the gender social bonds in the Latin American market between 2019 and 2022. The results revealed that a total of USD 1 billion was issued by 12 issuers conducting 14 issuances across six countries. Also, most issuances were financial corporations (58.4%) and supranational banks had a pivotal role in this market by being buyers and/or lead managers. As the first study conducted on this topic, this represents a milestone in sustainable finance research. Finally, this study will allow policy makers, regulators, and researchers to promote the issuance of gender social bonds. [ABSTRACT FROM AUTHOR]

Following the enactment of the Corporate Sustainability Reporting Directive and the creation of the European Sustainability Reporting Standards (ESRS rules), the European Union has set a new regime of mandatory corporate sustainability reporting in motion. However, most of the ESRS rules will be mandatory depending on, or subject to, the assessment of double materiality. This article sheds light on the double materiality requirement. More particularly, the analysis focusses on the materiality assessment of the impacts of corporate actions, the challenges involved in such determination, and the associated legal risks. Challenges examined include the legal risk in the company-stakeholders engagement process, the accuracy and completeness of reporting, and the uncertainty about the legal criteria for determining impact materiality. This article recommends (1) that a sound legal strategy guide the company-stakeholders interaction regarding external impacts, (2) that enforcement strategies be designed to accommodate unintentional greenwashing, and (3) that assurance practices for sustainability reporting be expeditiously implemented. [ABSTRACT FROM AUTHOR]

The sustainable finance industry has boomed in the face of uncertainties ranging from its justification as a viable financial product to its impact in terms of sustainability outcomes. This article seeks to characterize the conditions of the present phase and to provide insights on its present direction of travel and how future progress might best occur through two lenses. First, it reviews elements of progress in sustainable finance over the past half-century as characterized by interactions between three primary factors. Second, it presents a study of recent green bond issuances that examines the strength of the connection between sustainable finance and sustainability objectives. Analysis suggests markets do not demand rigorous design standards or accountability and are focussed on product sector growth over sustainability outcomes. Classification of finance as sustainable often lacks appropriate validation from independent due diligence and verification, post-investment assessment of outcomes, and an oversight regime assuring information integrity. The notion that allocating capital to sustainability-labelled financial products contributes to desired outcomes may be an illusion that is distracting from, and so delaying, a more demanding approach to directionally positive capital allocation. Lessons for newer sustainability linked products are considered. Suggested reforms require firmer public governance oversight regulation if acts undertaken in the debt capital markets are to meaningfully contribute to urgent sustainability challenges. [ABSTRACT FROM AUTHOR]