Theories of Sustainable Finance

Abstract

This paper formulates new theories of sustainable finance. The need for new theories of sustainable finance arises from the need to establish a set of propositions that can help us understand the behaviour and actions of economic agents towards sustainable finance. Six theories of sustainable finance were formulated, namely, the priority theory of sustainable finance, the resource theory of sustainable finance, the peer emulation theory of sustainable finance, the life span theory of sustainable finance, the positive signalling theory of sustainable finance, and the system disruption theory of sustainable finance. These theories offer believable explanations for the behaviour and actions of economic agents towards sustainable finance. Academics, policy makers, economists, researchers and students will find these theories very useful in their work in sustainable finance.

Keywords: Sustainable finance, theories of sustainable finance, priority theory, resource theory, peer emulation theory, life span theory, positive signalling theory, system disruption theory, economic agents, green bonds, green finance

JEL Classification: Q01, 21, G28