Ecological Finance Theory: New Foundations

Abstract

This paper puts forth Ecological Finance Theory as a valuable new vision for financial economics. Ecological Finance Theory is a mission-driven proposition seeking to re-embed financial systems within social and ecological constraints in order to ensure social resilience. Ecological Finance theory acknowledges the insufficiency of the neoclassical model to account for and respond to the socio-economic and biophysical realities of a post pandemic world. It introduces a sound ontological and epistemological framework taking into account the complex interactions between the financial, socio-economic and biophysical realms, and the impact of financial models in shaping reality. It draws on biological theory to provide insight into new metaphors and concepts for the study of financial systems. This paper paves the way for future work within this theory. We first describe its meta-theoretical hypotheses. We then introduce an initial set of metaphors. We finally develop a puzzle-solving application with a new stock-flow consistent model permitting to analyze ways to upscale the transformative power of local complementary currencies.

Keywords: Ecological Finance Theory, Finance, Sustainability

JEL Classification: G00