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Why should sustainable finance be given priority?

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  • Clevo Wilson

Abstract

Purpose - The purpose of this paper is to demonstrate that the relatively new concept of sustainable finance, although very apt and timely, needs to address many major issues for it to be meaningful and if it is to achieve its desired objectives. Design/methodology/approach - The study identifies some of the major issues that need to be clarified and addressed including: defining the kind of sustainability that is envisaged; examining issues relating to the use of high‐discount rates and its compatibility with the goals of sustainability; the case of excessive pollution due to adverse selection, moral hazard and lobbying; and specialisation and path dependent systems that are detrimental to future production. Findings - The paper demonstrates why the concept of sustainable finance is timely and why it is necessary to take into account the potential major issues that need to be considered and adequately addressed. Research limitations/implications - The challenges that lie ahead are many, and the sooner they are addressed, the more credible and potent sustainable finance will be. Practical implications - This paper discusses the major issues and examples of pollution and biodiversity degradation that need to be considered with sustainable finance. The paper also shows why economic growth without considering pollution impacts and path dependent systems is detrimental to future production, which violates the concept of sustainable finance. Originality/value - Sustainable finance is a relatively new concept that is fast becoming important as financial investments are increasingly required to prove sustainability credentials. However, despite its increasing popularity many major issues need to be dealt with if this concept is to be truly meaningful and potent in achieving its objectives.

Suggested Citation

  • Clevo Wilson, 2010. "Why should sustainable finance be given priority?," Accounting Research Journal, Emerald Group Publishing Limited, vol. 23(3), pages 267-280, November.
    • Handle: RePEc:eme:arjpps:v:23:y:2010:i:3:p:267-280
    DOI: 10.1108/10309611011092592
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    References listed on IDEAS

    as
    1. Hanley, Nick & Shogren, Jason & White, Ben, 2013. "Introduction to Environmental Economics," OUP Catalogue, Oxford University Press, edition 2, number 9780199568734.
    2. repec:bla:scandj:v:96:y:1994:i:2:p:257-65 is not listed on IDEAS
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    Citations

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    Cited by:

    1. Alexandre Rambaud & Jacques Richard, 2015. "Towards a finance that CARES," Post-Print halshs-01260075, HAL.
    2. Juan David González-Ruiz & Sergio Botero-Botero & Eduardo Duque-Grisales, 2018. "Financial Eco-Innovation as a Mechanism for Fostering the Development of Sustainable Infrastructure Systems," Sustainability, MDPI, vol. 10(12), pages 1-19, November.
    3. Clarence Tolliver & Hidemichi Fujii & Alexander Ryota Keeley & Shunsuke Managi, 2021. "Green Innovation and Finance in Asia," Asian Economic Policy Review, Japan Center for Economic Research, vol. 16(1), pages 67-87, January.
    4. Halkos, George & Managi, Shunsuke, 2017. "Land use, forest preservation and biodiversity in Asia," MPRA Paper 82883, University Library of Munich, Germany.

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