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Ecological money and finance. Introducing ecological risk-free assets

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  • Lagoarde-Ségot, Thomas
  • Revelli, Christophe

Abstract

This article contributes to the ecological money and finance literature by introducing a prototype ecological monetary policy mechanism, in which the Central Bank issues reserves in exchange for ecological risk-free assets (ERFAs) measuring the ex-post contribution of banks' loans portfolios to sustainability. We first describe the mechanism using double entry accounting and discuss its theoretical foundations. We then raise analytical intuition on some of its potential financial, economic and ecosystem effects using Philia 1.0, a new ecological PK-SFC model. We finally discuss the extent to which the prototype ecological monetary policy could contribute to the UN SDGs and identify new avenues for future research.

Suggested Citation

  • Lagoarde-Ségot, Thomas & Revelli, Christophe, 2023. "Ecological money and finance. Introducing ecological risk-free assets," International Review of Financial Analysis, Elsevier, vol. 90(C).
    • Handle: RePEc:eee:finana:v:90:y:2023:i:c:s1057521923003873
    DOI: 10.1016/j.irfa.2023.102871
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    More about this item

    Keywords

    Ecological money; Ecological finance; Monetary policy; Stock-flow consistent modeling;
    All these keywords.

    JEL classification:

    • G00 - Financial Economics - - General - - - General

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