How sustainable finance creates impact: transmission mechanisms to the real economy
When and how does sustainable finance tangibly contribute to creating a better world? In this paper, we outline mechanisms through which impact on sustainability outcomes is transmitted from financial systems to the real economy. We argue that, to have a positive impact on sustainability outcomes, f...
| Main Authors: | , , , |
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| Format: | Journal article |
| Language: | English |
| Published: |
Springer
2024
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| _version_ | 1826313464683954176 |
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| author | Caldecott, B Clark, A Harnett, E Liu, F |
| author_facet | Caldecott, B Clark, A Harnett, E Liu, F |
| author_sort | Caldecott, B |
| collection | OXFORD |
| description | When and how does sustainable finance tangibly contribute to creating a better world? In this
paper, we outline mechanisms through which impact on sustainability outcomes is
transmitted from financial systems to the real economy. We argue that, to have a positive
impact on sustainability outcomes, financial institutions must make a clear contribution to: (i)
reducing (increasing) the cost of capital for firms’ (un)sustainable activities; (ii) increasing
(reducing) their access to liquidity; and (iii) encouraging or enabling sustainable corporate
practices. We assess the potential for impact in each category across several asset classes. We
analyse how financial institutions can integrate the development of “impact budgets” into
strategic asset allocation. Finally, we consider ways in which future research could consider
the implications for impact-oriented portfolio construction in more detail and develop
empirical methods for further testing and quantifying the impact of the different transmission
mechanisms we discuss. |
| first_indexed | 2024-04-23T08:25:32Z |
| format | Journal article |
| id | oxford-uuid:5dc218b2-ab17-4caa-bf2b-6e3e30bde4ba |
| institution | University of Oxford |
| language | English |
| last_indexed | 2024-09-25T04:15:23Z |
| publishDate | 2024 |
| publisher | Springer |
| record_format | dspace |
| spelling | oxford-uuid:5dc218b2-ab17-4caa-bf2b-6e3e30bde4ba2024-07-16T12:30:42ZHow sustainable finance creates impact: transmission mechanisms to the real economyJournal articlehttp://purl.org/coar/resource_type/c_dcae04bcuuid:5dc218b2-ab17-4caa-bf2b-6e3e30bde4baEnglishSymplectic ElementsSpringer2024Caldecott, BClark, AHarnett, ELiu, FWhen and how does sustainable finance tangibly contribute to creating a better world? In this paper, we outline mechanisms through which impact on sustainability outcomes is transmitted from financial systems to the real economy. We argue that, to have a positive impact on sustainability outcomes, financial institutions must make a clear contribution to: (i) reducing (increasing) the cost of capital for firms’ (un)sustainable activities; (ii) increasing (reducing) their access to liquidity; and (iii) encouraging or enabling sustainable corporate practices. We assess the potential for impact in each category across several asset classes. We analyse how financial institutions can integrate the development of “impact budgets” into strategic asset allocation. Finally, we consider ways in which future research could consider the implications for impact-oriented portfolio construction in more detail and develop empirical methods for further testing and quantifying the impact of the different transmission mechanisms we discuss. |
| spellingShingle | Caldecott, B Clark, A Harnett, E Liu, F How sustainable finance creates impact: transmission mechanisms to the real economy |
| title | How sustainable finance creates impact: transmission mechanisms to the real economy |
| title_full | How sustainable finance creates impact: transmission mechanisms to the real economy |
| title_fullStr | How sustainable finance creates impact: transmission mechanisms to the real economy |
| title_full_unstemmed | How sustainable finance creates impact: transmission mechanisms to the real economy |
| title_short | How sustainable finance creates impact: transmission mechanisms to the real economy |
| title_sort | how sustainable finance creates impact transmission mechanisms to the real economy |
| work_keys_str_mv | AT caldecottb howsustainablefinancecreatesimpacttransmissionmechanismstotherealeconomy AT clarka howsustainablefinancecreatesimpacttransmissionmechanismstotherealeconomy AT harnette howsustainablefinancecreatesimpacttransmissionmechanismstotherealeconomy AT liuf howsustainablefinancecreatesimpacttransmissionmechanismstotherealeconomy |