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Sustainable finance: A new paradigm

Author

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  • Fatemi, Ali M.
  • Fooladi, Iraj J.

Abstract

We argue that our current approach to shareholder wealth maximization is no longer a valid guide to creation of sustainable wealth: An emphasis on short-term results has had the unintended consequence of forcing many firms to externalize their social and environmental costs. An unwavering faith in markets' ability to efficiently uncover long-term value implications of short-term results has created many unacceptable outcomes. Given the social and environmental challenges ahead, such practices and their unacceptable outcomes cannot be sustained. Therefore, a shift in paradigm is called for. We propose a sustainable value creation framework, within which all social and environmental costs and benefits are to be explicitly accounted for.

Suggested Citation

  • Fatemi, Ali M. & Fooladi, Iraj J., 2013. "Sustainable finance: A new paradigm," Global Finance Journal, Elsevier, vol. 24(2), pages 101-113.
    • Handle: RePEc:eee:glofin:v:24:y:2013:i:2:p:101-113
    DOI: 10.1016/j.gfj.2013.07.006
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    References listed on IDEAS

    as
    1. Ali Fatemi & Iraj J. Fooladi & David Wheeler, 2009. "The Relative Valuation of Socially Responsible Firms: an Exploratory Study," Palgrave Macmillan Books, in: Henri-Claude Bettignies & François Lépineux (ed.), Finance for a Better World, chapter 8, pages 140-167, Palgrave Macmillan.
    2. J.P. Gond & A. El Akremi & J. Igalens & V. Swaen, 2011. "A corporate social responsibility," Post-Print hal-00826426, HAL.
    3. El Ghoul, Sadok & Guedhami, Omrane & Kwok, Chuck C.Y. & Mishra, Dev R., 2011. "Does corporate social responsibility affect the cost of capital?," Journal of Banking & Finance, Elsevier, vol. 35(9), pages 2388-2406, September.
    4. Robert G. Eccles & Ioannis Ioannou & George Serafeim, 2012. "The Impact of Corporate Sustainability on Organizational Processes and Performance," NBER Working Papers 17950, National Bureau of Economic Research, Inc.
    5. Henri Servaes & Ane Tamayo, 2013. "The Impact of Corporate Social Responsibility on Firm Value: The Role of Customer Awareness," Management Science, INFORMS, vol. 59(5), pages 1045-1061, May.
    6. Goss, Allen & Roberts, Gordon S., 2011. "The impact of corporate social responsibility on the cost of bank loans," Journal of Banking & Finance, Elsevier, vol. 35(7), pages 1794-1810, July.
    7. Zakri Y. Bello, 2005. "Socially Responsible Investing And Portfolio Diversification," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 28(1), pages 41-57, March.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Sustainable finance; Value creation; Corporate social responsibility;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G39 - Financial Economics - - Corporate Finance and Governance - - - Other

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