Abstract
There is currently a growing consensus that the financial system falls short of fulfilling its social purpose. This not only poses a practical challenge for the world leaders but also poses a theoretical challenge for contemporary research: to rethink the role of financial markets in society. According to the dominant view of finance, rooted in neoclassical economic theorizing, financial agents should always adopt the practices which maximize the value of the firm. This chapter draws out the reasoning behind this view, which in part consists in an idea of a “division of moral labor ”: social responsibility should be a task for the social services and civil society, whereas the financial system should focus only on raising and maintaining capital. Clarifying this reasoning draws out some flaws of the dominant view, for example, the inherent conflicts between private and public interests and the lack of attention to all-encompassing challenges such as climate change . To address these flaws, a new theory is proposed for a more sustainable role of finance in society. The theory represents an attempt to strike a balance between opposing camps in contemporary business ethics research. Moreover, the chapter discusses implications of the new theory for both public policies and the governance of financial institutions.
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Acknowledgments
This chapter was presented at the UNEP Inquiry/CIGI Research Convening which took place in Waterloo (Canada) on 2–3 December 2014. A previous version was published online as UNEP Inquiry Working Paper 15/08, October 2015.
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Sandberg, J. (2018). Toward a Theory of Sustainable Finance. In: Walker, T., Kibsey, S.D., Crichton, R. (eds) Designing a Sustainable Financial System. Palgrave Studies in Sustainable Business In Association with Future Earth. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-66387-6_12
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