Sustainable Finance Initiative: The role of financial markets for a sustainable development

An increasing number of institutions ranging from pension funds to governments are considering sustainability aspects in their financial analyses and asset allocation decisions. Sustainable finance refers to the process of taking such environmental and social factors into account when raising capital and making investment decisions. This may be motivated by a desire to help reduce inequality, improve access to education and health, tackle climate change, and/or by a belief that sustainable investments enhance financial returns.

The Sustainable Finance Initiative is closely linked to the research of the three Misum research platforms - Sustainable Business Development through Entrepreneurship and Innovation, Human Capital and Sustainable Development, and Accounting Frameworks - as they all relate to different facets of capital allocation for sustainable development. Examples of research questions that we study are:

1) Do financial markets effectively price long-term risks and rewards, such as those that are climate-related? Or do they exhibit a short-term bias? If so, how can more long-term perspectives in financial markets be stimulated?

2) How can we finance the transition towards a low-carbon and otherwise sustainable economy? What role can new financial instruments, such as green and social bonds, play?

3) Carbon taxes intend to reduce carbon dioxide emissions by increasing the price of fossil fuels and decreasing the demand for them. How effective are carbon taxes in reducing emissions? What are effective policy tools?

4) How do investors drive change in the corporate sector? How effective are different strategies for incorporating environmental and social factors in decision-making?