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Written by Johannes Jäger, University of Applied Sciences BFI Vienna, Austria and Ewa Dziwok, University of Economics at Katowice, Poland

Green finance has frequently been accused for green washing. Recently critics stated that green finance might contribute to problematic financial practices and processes often referred to as financialisation. Libertarian approaches have put green financial practices into the box of “woke capitalism”, considering it as a useless effort. Hence, its time to have closer look at green finance. Are these critiques valuable? Is green finance a recipe to solve ecological problems? In which form does green finance really work?
Green finance has become a widespread strategy of the financial sector, from investors, mutual funds, commercial banks, regulators to central banks and international institutions. In general the underling assumption is that these activities contribute to address environmental problems and help to economy become carbon neutral. There are numerous activities taking place under the header of green finance. These strategies are very diverse. A closer look unveils that these activities and approaches to green finance are even contradictory. However, a systematic analysis of this approaches had been missing so far. This is, where the Understanding Green Finance Book comes in.

The book Understanding Green Finance critically assess the current dominant forms of green finance that can be classified as neoliberal. It analyses problematic assumptions and the resulting implications. Neoliberal forms of green finance rely mainly on private finance. They are based on the assumption of commensurability embodied in the concept of “natural capital” and suppose that markets will align economic and environmental issues. Neoliberal green finance tends to deepen financialisation and does not effectively address environmental problems. Besides neoliberal approaches, there are reformist forms of green finance which insist that state regulation and public financing are crucial to tackling environmental problems. Such alternative perspectives are currently becoming more important. Therefore, the authors in this book present reformist proposals to green finance and green monetary policies and analyse their implications.

Both perspectives, neoliberal and reformist, however, assume that there is no principal conflict between economic growth and environmental sustainability. Contrary to this, transformative-progressive forms of green finance suppose that there is a fundamental contradiction between capitalist expansion and the limits of natural resources on our planet. A wealthy global minority causes the majority of environmental problems in terms of ecological footprint. A transformative-progressive approach considers that wealth inequality is related to ecological inequality. Hence, environmental issues should be discussed against the background of global and ecological inequality and green finance should contribute to reduce these inequalities. This requires a socio-ecological transformation that goes beyond market-based forms of organisation and supports institutions based on global solidarity. Transformative-progressive forms of green finance support a socio-ecological transformation but are, as the authors show, currently at the best at an initial state.

Understanding Green Finance
Edited by Johannes Jäger, University of Applied Sciences BFI Vienna, Austria and Ewa Dziwok, University of Economics at Katowice, Poland is available now.

Read the introduction and other free chapters on Elgaronline.