Sustainable Finance and Government Policy
Topics in corporate finance Issue 27
This 27th issue of the ACCF Topics in Corporate Finance series seeks to contribute to the current public debate on sustainability in finance and sustainable development.
In the first contribution to this issue, prof. Dirk Schoenmaker (Erasmus University Rotterdam), professor of Banking and Finance, provides a typology of sustainable finance: what does it consist of and how can we have finance develop as a means toward sustainable development? He distinguishes three stages of sustainable finance, from avoiding ‘sin’ stocks, via internalization of externalities to actually contributing to sustainable development directly. In his empirical assessment of the international practices, he ranks the current state of the financial sector as still mainly in the first stage: just avoiding activities and investments in companies with evidently very negative societal impact. Much progress is still to be made.
The second contribution (in Dutch) comes from work of the Sustainable Finance Lab and Circle Economy for the Dutch Ministry of Economic Affairs and Climate Policy and is authored by Rens van Tilburg, Elisa Achterberg and Max van Son. It studies the potential market failures in reaching a circular economy, and lists the various government instruments and policies aimed at overcoming such shortcomings. It identifies bottlenecks and discusses the pros and cons of the different instruments and policies. In doing so, it provides some clarity on the effectiveness of government policy.