IDEAS home Printed from https://ideas.repec.org/p/hal/journl/hal-02016756.html
   My bibliography  Save this paper

Financial Markets and the Transition to a Low-Carbon Economy: Challenging the Dominant Logics

Author

Listed:
  • Céline Louche

    (Audencia Business School)

  • Timo Busch

    (University of Hamburg)

  • Patricia Crifo

    (UPN - Université Paris Nanterre)

  • Alfred Marcus

    (UMN - University of Minnesota [Twin Cities] - University of Minnesota System)

Abstract

Financial markets play a major role in contributing to the transition to a low-carbon economy. Although many initiatives and developments are taking place, this is just the beginning. In this article, we argue for a theory of change—a theory rooted in logics that will help financial markets play a key role in the transition to a low-carbon economy. We argue that the current dominant logics in finance—short-termism, predictability of the future based on ex-post data, price efficiency, and risk-adjusted returns—impede the effective integration of climate considerations in financial markets. We suggest four alternative logics that can enable and foster a change toward the low-carbon economy: long-termism, systems interconnectedness, carbon price dynamics, and active ownership.

Suggested Citation

  • Céline Louche & Timo Busch & Patricia Crifo & Alfred Marcus, 2019. "Financial Markets and the Transition to a Low-Carbon Economy: Challenging the Dominant Logics," Post-Print hal-02016756, HAL.
    • Handle: RePEc:hal:journl:hal-02016756
    DOI: 10.1177/1086026619831516
    Note: View the original document on HAL open archive server: https://audencia.hal.science/hal-02016756
    as

    Download full text from publisher

    File URL: https://audencia.hal.science/hal-02016756/document
    Download Restriction: no
    File URL: https://libkey.io/10.1177/1086026619831516?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Drazen Prelec & George Loewenstein, 1991. "Decision Making Over Time and Under Uncertainty: A Common Approach," Management Science, INFORMS, vol. 37(7), pages 770-786, July.
    2. Patricia Crifo & Marc-Arthur Diaye & Rim Oueghlissi, 2014. "Measuring the effect of government ESG performance on sovereign borrowing cost," CIRANO Working Papers 2014s-37, CIRANO.
    3. Jennifer Goodman & Céline Louche & Katinka Cranenburgh & Daniel Arenas, 2014. "Social Shareholder Engagement: The Dynamics of Voice and Exit," Journal of Business Ethics, Springer, vol. 125(2), pages 193-210, December.
    4. Tobias Hahn & Frank Figge & Jonatan Pinkse & Lutz Preuss, 2018. "A Paradox Perspective on Corporate Sustainability: Descriptive, Instrumental, and Normative Aspects," Journal of Business Ethics, Springer, vol. 148(2), pages 235-248, March.
    5. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
    6. Julian F. Kölbel & Timo Busch & Leonhardt M. Jancso, 2017. "How Media Coverage of Corporate Social Irresponsibility Increases Financial Risk," Strategic Management Journal, Wiley Blackwell, vol. 38(11), pages 2266-2284, November.
    7. E. Gifford, 2010. "Effective Shareholder Engagement: The Factors that Contribute to Shareholder Salience," Journal of Business Ethics, Springer, vol. 92(1), pages 79-97, April.
    8. Michael C. Jensen, 2010. "Value Maximization, Stakeholder Theory, and the Corporate Objective Function," Journal of Applied Corporate Finance, Morgan Stanley, vol. 22(1), pages 32-42, January.
    9. Steven Lydenberg, 2007. "Universal Investors and Socially Responsible Investors: a tale of emerging affinities," Corporate Governance: An International Review, Wiley Blackwell, vol. 15(3), pages 467-477, May.
    10. Sir Nicholas Stern, 2006. "What is the Economics of Climate Change?," World Economics, World Economics, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 7(2), pages 1-10, April.
    11. Sarah Birrell Ivory & Simon Bentley Brooks, 2018. "Managing Corporate Sustainability with a Paradoxical Lens: Lessons from Strategic Agility," Journal of Business Ethics, Springer, vol. 148(2), pages 347-361, March.
    12. Steve Lydenberg, 2014. "Reason, Rationality, and Fiduciary Duty," Journal of Business Ethics, Springer, vol. 119(3), pages 365-380, February.
    13. Sarah Birrell Ivory & Simon Bentley Brooks, 2018. "Erratum to: Managing Corporate Sustainability with a Paradoxical Lens: Lessons from Strategic Agility," Journal of Business Ethics, Springer, vol. 148(2), pages 363-363, March.
    14. Esteban Pérez Caldentey & Matías Vernengo, 2010. "Modern Finance, Methodology and the Global Crisis," Working Paper Series, Department of Economics, University of Utah 2010_04, University of Utah, Department of Economics.
    15. Farraghe, Edward J. & Kleiman, Robert & Bazaz, Mohammed S., 1994. "Do investor relations make a difference?," The Quarterly Review of Economics and Finance, Elsevier, vol. 34(4), pages 403-412.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Boyu Li & Lishan Li & Tianlei Pi, 2022. "Is the R&D Expenditure of Listed Companies Green? Evidence from China’s A-Share Market," IJERPH, MDPI, vol. 19(19), pages 1-16, September.
    2. Lee, Chien-Chiang & Wang, Fuhao & Lou, Runchi, 2022. "Digital financial inclusion and carbon neutrality: Evidence from non-linear analysis," Resources Policy, Elsevier, vol. 79(C).
    3. Yuanfeng Hu & Yixiang Tian & Luping Zhang, 2023. "Green Bond Pricing and Optimization Based on Carbon Emission Trading and Subsidies: From the Perspective of Externalities," Sustainability, MDPI, vol. 15(10), pages 1-20, May.
    4. Louis Daumas, 2021. "Should we fear transition risks - A review of the applied literature," Working Papers 2021.05, FAERE - French Association of Environmental and Resource Economists.
    5. Salome Zimmermann, 2019. "Same Same but Different: How and Why Banks Approach Sustainability," Sustainability, MDPI, vol. 11(8), pages 1-20, April.
    6. Markus Riegler, 2023. "Towards a definition of sustainable banking - a consolidated approach in the context of guidelines and strategies," International Journal of Corporate Social Responsibility, Springer, vol. 8(1), pages 1-26, December.
    7. Gutberlet, Melissa & Preuss, Lutz & Thorpe, Andrea Stevenson, 2023. "Macro level matters: Advancing circular economy in different business systems within Europe," Ecological Economics, Elsevier, vol. 211(C).
    8. Pramit Verma & Justyna Chodkowska‐Miszczuk & Agata Lewandowska & Łukasz Wiśniewski, 2023. "Local resilience for low‐carbon transition in Poland: Frameworks, conditions and opportunities for Central European countries," Sustainable Development, John Wiley & Sons, Ltd., vol. 31(3), pages 1278-1295, June.
    9. Neil Gunningham, 2020. "A Quiet Revolution: Central Banks, Financial Regulators, and Climate Finance," Sustainability, MDPI, vol. 12(22), pages 1-22, November.
    10. Iordanis Kotzaivazoglou & Garyfallos Fragidis & Eugenia Papaioannou & Costas Assimakopoulos & Ioannis Nanos & Nektaria Astrini, 2023. "Supporting Culture to Improve Corporate Image: The Case of Greek Banks," Sustainability, MDPI, vol. 15(5), pages 1-16, February.
    11. Diego Monferrer & José Ramón Segarra & Marta Estrada & Miguel Ángel Moliner, 2019. "Service Quality and Customer Loyalty in a Post-Crisis Context. Prediction-Oriented Modeling to Enhance the Particular Importance of a Social and Sustainable Approach," Sustainability, MDPI, vol. 11(18), pages 1-27, September.
    12. Amparo Soler-Domínguez & Juan Carlos Matallín-Sáez & Diego Víctor de Mingo-López & Emili Tortosa-Ausina, 2020. "Social responsible mutual funds and lowcarbon economy," Working Papers 2020/15, Economics Department, Universitat Jaume I, Castellón (Spain).
    13. Deng, Yue & Jiang, Wanyi & Wang, Zeyu, 2023. "Economic resilience assessment and policy interaction of coal resource oriented cities for the low carbon economy based on AI," Resources Policy, Elsevier, vol. 82(C).
    14. Maria Folqué & Elena Escrig‐Olmedo & Teresa Corzo Santamaría, 2021. "Sustainable development and financial system: Integrating ESG risks through sustainable investment strategies in a climate change context," Sustainable Development, John Wiley & Sons, Ltd., vol. 29(5), pages 876-890, September.
    15. Roberto Louis Forestal & Shih-Ming Pi, 2021. "Using Artificial Neural networks and Optimal Scaling Model to Forecast Agriculture Commodity Price: An Ecological-economic Approach," Advances in Management and Applied Economics, SCIENPRESS Ltd, vol. 11(3), pages 1-3.
    16. D'Adamo, Idiano & Falcone, Pasquale Marcello & Imbert, Enrica & Morone, Piergiuseppe, 2020. "A Socio-economic Indicator for EoL Strategies for Bio-based Products," Ecological Economics, Elsevier, vol. 178(C).
    17. Monk, Alexander & Perkins, Richard, 2020. "What explains the emergence and diffusion of green bonds?," Energy Policy, Elsevier, vol. 145(C).
    18. Zhu, Qing & Lu, Kai & Liu, Shan & Ruan, Yinglin & Wang, Lin & Yang, Sung-Byung, 2022. "Can low-carbon value bring high returns? Novel quantitative trading from portfolio-of-investment targets in a new-energy market," Economic Analysis and Policy, Elsevier, vol. 76(C), pages 755-769.
    19. Amparo Soler‐Domínguez & Juan Carlos Matallín‐Sáez & Diego Víctor de Mingo‐López & Emili Tortosa‐Ausina, 2021. "Looking for sustainable development: Socially responsible mutual funds and the low‐carbon economy," Business Strategy and the Environment, Wiley Blackwell, vol. 30(4), pages 1751-1766, May.
    20. Birindelli, Giuliana & Miazza, Aline & Paimanova, Viktoriia & Palea, Vera, 2023. "Just “blah blah blah”? Stock market expectations and reactions to COP26," International Review of Financial Analysis, Elsevier, vol. 88(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jonathan Taglialatela & Kevin Pirazzi Maffiola & Roberto Barontini & Francesco Testa, 2023. "Board of Directors' characteristics and environmental SDGs adoption: an international study," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 30(5), pages 2490-2506, September.
    2. Sharma, Varun & Vijayaraghavan, T.A.S. & Raghu Ram, Tata L., 2023. "Resolving operational paradox of sustainable supply chain: A decision framework approach," Socio-Economic Planning Sciences, Elsevier, vol. 87(PB).
    3. Aisma Linda Kiesnere & Rupert J. Baumgartner, 2019. "Sustainability Management in Practice: Organizational Change for Sustainability in Smaller Large-Sized Companies in Austria," Sustainability, MDPI, vol. 11(3), pages 1-40, January.
    4. Jingchen Zhao, 2021. "Reimagining Corporate Social Responsibility in the Era of COVID-19: Embedding Resilience and Promoting Corporate Social Competence," Sustainability, MDPI, vol. 13(12), pages 1-28, June.
    5. Jaakko Siltaloppi & Risto Rajala & Henri Hietala, 2021. "Integrating CSR with Business Strategy: A Tension Management Perspective," Journal of Business Ethics, Springer, vol. 174(3), pages 507-527, December.
    6. Jay Joseph & Helen Borland & Marc Orlitzky & Adam Lindgreen, 2020. "Seeing Versus Doing: How Businesses Manage Tensions in Pursuit of Sustainability," Journal of Business Ethics, Springer, vol. 164(2), pages 349-370, June.
    7. Emilio Abad-Segura & Francisco Joaquín Cortés-García & Luis J. Belmonte-Ureña, 2019. "The Sustainable Approach to Corporate Social Responsibility: A Global Analysis and Future Trends," Sustainability, MDPI, vol. 11(19), pages 1-24, September.
    8. Kai Hockerts & Cory Searcy, 2023. "How to Sharpen Our Discourse on Corporate Sustainability and Business Ethics—A View from the Section Editors," Journal of Business Ethics, Springer, vol. 187(2), pages 225-235, October.
    9. Erthal, Alice & Frangeskou, Marianna & Marques, Leonardo, 2021. "Cultural tensions in lean healthcare implementation: A paradox theory lens," International Journal of Production Economics, Elsevier, vol. 233(C).
    10. Tiziana Russo Spena & Nadia Di Paola, 2020. "Moving beyond the tensions in open environmental innovation towards a holistic perspective," Business Strategy and the Environment, Wiley Blackwell, vol. 29(5), pages 1961-1974, July.
    11. Ignacio Alvarez Mon & Patricia Gabaldón & Margarita Nuñez, 2022. "Social entrepreneurs: making sense of tensions through the application of alternative strategies of hybrid organizations," International Entrepreneurship and Management Journal, Springer, vol. 18(2), pages 975-997, June.
    12. Fracarolli Nunes, Mauro & Lee Park, Camila & Shin, Hyunju, 2021. "Corporate social and environmental irresponsibilities in supply chains, contamination, and damage of intangible resources: A behavioural approach," International Journal of Production Economics, Elsevier, vol. 241(C).
    13. Andreas G. F. Hoepner & Lisa Schopohl, 2020. "State Pension Funds and Corporate Social Responsibility: Do Beneficiaries’ Political Values Influence Funds’ Investment Decisions?," Journal of Business Ethics, Springer, vol. 165(3), pages 489-516, September.
    14. Saurabh Mishra & Sachin Modi, 2013. "Positive and Negative Corporate Social Responsibility, Financial Leverage, and Idiosyncratic Risk," Journal of Business Ethics, Springer, vol. 117(2), pages 431-448, October.
    15. Bouguerra, Abderaouf & Gölgeci, Ismail & Gligor, David M. & Tatoglu, Ekrem, 2021. "How do agile organizations contribute to environmental collaboration? Evidence from MNEs in Turkey," Journal of International Management, Elsevier, vol. 27(1).
    16. Mariana Mazzucato & Caetano C.R. Penna, 2016. "Beyond market failures: the market creating and shaping roles of state investment banks," Journal of Economic Policy Reform, Taylor and Francis Journals, vol. 19(4), pages 305-326, October.
    17. Alberto Barroso del Toro & Laura Vivas Crisol & Xavier Tort-Martorell, 2022. "Comparing the Impacts of Sustainability Narratives on American and European Energy Shareholders: A Multi-Event Study Analysing Reactions to News before and during COVID-19," Sustainability, MDPI, vol. 14(23), pages 1-18, November.
    18. Jennifer Goodman & Céline Louche & Katinka Cranenburgh & Daniel Arenas, 2014. "Social Shareholder Engagement: The Dynamics of Voice and Exit," Journal of Business Ethics, Springer, vol. 125(2), pages 193-210, December.
    19. Allen Kaufman & Ernie Englander, 2011. "Behavioral Economics, Federalism, and the Triumph of Stakeholder Theory," Journal of Business Ethics, Springer, vol. 102(3), pages 421-438, September.
    20. Laure-Anne Parpaleix & Blanche Segrestin, 2019. "Firms with a mission as a vector of the long term," Post-Print hal-03030229, HAL.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:journl:hal-02016756. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.