A Framework for Sustainable Finance

31 Pages Posted: 22 Jan 2018

See all articles by Dirk Schoenmaker

Dirk Schoenmaker

Rotterdam School of Management, Erasmus University; Erasmus Research Institute of Management (ERIM); Centre for Economic Policy Research (CEPR)

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Date Written: January 2018

Abstract

To guide the transformation towards a sustainable and inclusive economy, the United Nations has developed the Sustainable Development Goals (SDGs). Sustainable development is an integrated concept with three aspects: economic, social and environmental. This paper starts by reviewing the environmental and social challenges that society is facing.

Why should finance contribute to sustainable development? The main task of the financial system is to allocate capital to its most productive use. Financial institutions have started to avoid unsustainable companies from a risk perspective, which we label as Sustainable Finance 1.0 and 2.0 in our new framework. The frontrunners are now increasingly investing in sustainable companies and projects to create long-term value for the wider community (Sustainable Finance 3.0).

Keywords: corporate governance, Environmental, Short-termism, Social and Governance (ESG) Risks, Sustainable Development, Sustainable Finance

JEL Classification: G11, G21, H23, H41, Q01

Suggested Citation

Schoenmaker, Dirk, A Framework for Sustainable Finance (January 2018). CEPR Discussion Paper No. DP12603. Available at SSRN: https://ssrn.com/abstract=3106807

Dirk Schoenmaker (Contact Author)

Rotterdam School of Management, Erasmus University ( email )

P.O. Box 1738
Room T08-21
3000 DR Rotterdam
Netherlands

HOME PAGE: http://www.rsm.nl/people/dirk-schoenmaker/

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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