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Sustainable Capital Market

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Financing Sustainable Development

Part of the book series: Palgrave Studies in Impact Finance ((SIF))

Abstract

This chapter aims to discuss the role played by the capital market in promoting sustainable development. The capital market proves to be a very flexible tool that is able to meet the evolving economic, social and environmental needs. Even though it has been shown that society as a whole has not fully internalized the need for socially responsible behavior, the capital market has done so because it has understood that sustainable development presents exciting opportunities. The adjustment of the capital market to the sustainability paradigm did not stop at conceptual strategies or approaches, but led to the creation of new environmental asset classes and innovative funding solutions such as green bonds. In this context, the capital market becomes a leading promoter of the structural reform of traditional businesses from carbon-intensive to climate-friendly projects. However, despite an encouraging start, the financing needs of sustainable development are far higher compared with the current size of green financial markets. Therefore, governments, international institutions, companies and the civil society itself should take a larger proactive role in this transformation by developing and supporting sound climate policies, green infrastructure projects and sustainable businesses.

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Notes

  1. 1.

    https://www.msci.com/documents/10199/904492e6-527e-4d64-9904-c710bf1533c6.

  2. 2.

    https://www.robeco.com/media/8/e/2/8e23308be3b0f4f0c97df9cadea242cf_180913-media-release-robecosam-djsi-review-2018-en-vdef_tcm1011-14614.pdf.

  3. 3.

    https://www.sustainability-indices.com/media/c/a/f/cafc43cab91d0f6bea1f2452cd903dc9_measuring-intangibles-csa-methodology_tcm10-15948.pdf.

  4. 4.

    https://www.ftse.com/Analytics/Factsheets/temp/61c7bbc3-e224-4429-9700-3fdc6946572d.pdf.

  5. 5.

    “Advancing TCFD guidance on physical climate risks and opportunities”, European Bank for Reconstruction and Development, 2018, available at https://s3.eu-west-2.amazonaws.com/ebrd-gceca/EBRD-GCECA_draft_final_report_full_2.pdf.

  6. 6.

    The Paris Agreement aims to strengthen the global response to the threat of climate change by keeping the global temperature increase during this century to less than 2 °C above pre-industrial levels and to pursue efforts to limit the temperature increase even further to 1.5 °C. Additionally, the agreement aims to strengthen the ability of countries to deal with the impacts of climate change. See https://unfccc.int/process-and-meetings/the-paris-agreement/the-paris-agreement.

  7. 7.

    http://globalinvestorcoalition.org/.

  8. 8.

    http://unepfi.org/pdc/.

  9. 9.

    https://gofossilfree.org/divestment/commitments/.

  10. 10.

    “Green Bonds 002°C - A guide to scale up climate finance”, World Business Council For Sustainable Development, 2015, available at https://www.wbcsd.org/Projects/Education/Resources/GREEN-BONDS-002-C-A-guide-to-scale-up-climate-finance.

  11. 11.

    Available at https://www.icmagroup.org/green-social-and-sustainability-bonds/green-bond-principles-gbp/ (last updated on June 2018).

  12. 12.

    Available at https://www.climatebonds.net/files/files/Climate%20Bonds%20Standard%20v2_1%20-%20January_2017.pdf (released in January 2017). A new version (3.0) was not yet finalized as of November 2018.

  13. 13.

    “Green Bond Impact Report 2018”, World Bank, 2018, available at http://pubdocs.worldbank.org/en/916521543500726747/report-impact-green-bond-low-re-2018.pdf.

  14. 14.

    “Final Report 2018 – Financing a Sustainable European Economy”, High-Level Expert Group on Sustainable Finance, 2018, available at https://ec.europa.eu/info/sites/info/files/180131-sustainable-finance-final-report_en.pdf.

  15. 15.

    “Climate Awareness Bonds Newsletter – 10th Anniversary”, European Investment Bank, June 2017, available at http://www.eib.org/attachments/fi/2017-cab-newsletter-10years.pdf.

  16. 16.

    “What Are Green Bonds?”, World Bank, 2015, available at http://documents.worldbank.org/curated/en/400251468187810398/pdf/99662-REVISED-WB-Green-Bond-Box393208B-PUBLIC.pdf.

  17. 17.

    The evolution of the green bond markets between 2013 and 2018 is described based on the CBI annual reports, available at https://www.climatebonds.net/resources/reports.

  18. 18.

    CBI estimates the climate-aligned bond universe at $1.45 trillion. Apart from labeled green bonds, this figure includes unlabeled bonds issued by fully aligned climate entities (that derive > 95% of revenues from climate-aligned assets and green business lines), by strongly aligned climate entities (that derive 75%–95% of revenues from climate-aligned assets and green business lines) and by US municipal agencies.

  19. 19.

    “Bonds and Climate Change: The State of the Market 2018”, CBI, available at https://www.climatebonds.net/resources/reports/bonds-and-climate-change-state-market-2018.

  20. 20.

    “Summary of Green Fixed Income Indices Providers”, The GBP Databases and Indices Working Group, ICMA, June 2017, available at https://www.cbd.int/financial/greenbonds/icma-indices2017.pdf.

  21. 21.

    https://us.spindices.com/indices/fixed-income/sp-green-bond-index.

  22. 22.

    “Ex-UN climate chief calls for green bonds to hit $1 trillion by 2020”, Climate Home News, March 2018, available at http://www.climatechangenews.com/2018/03/21/ex-un-climate-chief-calls-green-bonds-hit-1-trillion-2020/.

  23. 23.

    “Ex-UN climate chief calls for green bonds to hit $1 trillion by 2020”, Climate Home News, March 2018, available at http://www.climatechangenews.com/2018/03/21/ex-un-climate-chief-calls-green-bonds-hit-1-trillion-2020/.

  24. 24.

    Mainly the Green Bond Principles issued by ICMA and the Climate Bonds Standard elaborated by CBI.

  25. 25.

    “Green-Bond Market Needs to Get Tough to Blossom”, Brian Chappatta, Bloomberg, July 2018, available at https://www.bloomberg.com/opinion/articles/2018-07-18/green-bond-market-needs-to-get-tough-to-blossom.

  26. 26.

    “Bonds and Climate Change: The State of the Market 2018”, CBI, available at https://www.climatebonds.net/resources/reports/bonds-and-climate-change-state-market-2018.

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Authors and Affiliations

  1. Department of Finance and CEFIMO, Faculty of Finance and Banking, The Bucharest University of Economic Studies, Bucharest, Romania

    Andreea Stoian & Filip Iorgulescu

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  1. Andreea Stoian
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  2. Filip Iorgulescu
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Correspondence to Andreea Stoian .

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  1. Faculty of Economics and Management, University of Szczecin, Szczecin, Poland

    Magdalena Ziolo

  2. Davis Center for Russian and Eurasian Studies, Harvard University, Cambridge, MA, USA

    Bruno S. Sergi

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Stoian, A., Iorgulescu, F. (2019). Sustainable Capital Market. In: Ziolo, M., Sergi, B.S. (eds) Financing Sustainable Development. Palgrave Studies in Impact Finance. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-16522-2_8

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  • DOI: https://doi.org/10.1007/978-3-030-16522-2_8

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