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Green and Sustainable Finance
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Green and Sustainable Finance

A special issue of Journal of Risk and Financial Management (ISSN 1911-8074). This special issue belongs to the section "Sustainability and Finance".

Deadline for manuscript submissions: closed (31 December 2020) | Viewed by 125229

Special Issue Editors

Prof. Dr. Sabri Boubaker

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Guest Editor
Métis Lab, EM Normandie Business School, 75016 Paris, France
Interests: corporate governance; corporate social responsibility; corporate finance
Special Issues, Collections and Topics in MDPI journals
Prof. Dr. Pierre Chollet

E-Mail Website
Guest Editor
Institut Montpellier Management, University of Montpellier, Montpellier, France
Interests: corporate social responsibility; finance; social responsible investment
Prof. Dr. Souad Lajili-Jarjir

E-Mail Website
Guest Editor
Institut de Recherche en Gestion, IRG (EA 2354), Université Paris-Est, UPEC, F-94000 Créteil, France
Interests: asset pricing; anomalies; factor models; corporate social responsibility

Special Issue Information

Dear Colleagues,

Green and sustainable finance are more important nowadays that even before. They are gaining increasing worldwide attention from financial markets, political actors and the broader public alike. Their objective is to take into account environmental, social or governance (ESG) criteria when making financial decisions and designing financial services, thus expanding the benefit beyond investors to the whole society. Academics and practitioners are questioning the role that green and sustainable finance plays, which goes beyond the primary function of finance as funding the economy. Aware of the importance of extra-financial issues, the investment community has noted a shift in focus from shareholders’ to stakeholders’ values. A new approach of finance is thus needed to answer questions related to green and sustainable finance. Financial markets, corporate finance and corporate governance have to integrate extra-financial aspects into financial decision making processes. Many issues remain unresolved and questions unanswered: How to allocate funds optimally in terms of financial and non-financial performance, how to finance the economy and satisfy a variety of objectives of stakeholders (firms, investors and society) from a more global point of view? What are the consequence of this fund allocation in terms of risk management for corporations and investors? Which asset pricing methods can be proposed to value these innovative financial instruments? What is the role of policy makers in developing green and sustainable finance?

This Special Issue aims to answer these questions and address the theoretical and empirical issues related to recent developments and new directions in green and sustainable finance. It will advance our understanding of how financial products support investments in projects that benefit the environment and promote a carbon-free economy. It will also contribute to the development of a more comprehensive analysis of the role of green and sustainable finance in shaping firm and investor decisions. Papers will draw on recent theoretical and empirical research that explores the reasons, importance, and implications of business ethics, corporate social responsibility (CSR), and socially responsible investing. These will be of interest and relevance to academics, practitioners and policy makers. The Special Issue welcomes contributions from a broad range of fields related to finance.

Topics considered include, but are not limited to, innovative instruments to finance the energetic transition and green energy; innovations in private equity; green lending products; innovations in asset management (whatever the underlying assets); impacts of climate change and sustainable challenges on risk management and asset valuation; measuring the impact of ESG on portfolios; the design of common methods of impact measurement on firms and portfolio-level credit for sustainable projects, the relevance and governance of SRI labels; CSR and corporate governance; doing well by doing good, socially responsible banking, ethics in corporate finance and financial markets, and greenwashing and greenhushing.

Prof. Dr. Sabri Boubaker
Prof. Dr. Pierre Chollet
Prof. Dr. Souad Lajili-Jarjir
Guest Editors

Manuscript Submission Information

Manuscripts should be submitted online at www.mdpi.com by registering and logging in to this website. Once you are registered, click here to go to the submission form. Manuscripts can be submitted until the deadline. All submissions that pass pre-check are peer-reviewed. Accepted papers will be published continuously in the journal (as soon as accepted) and will be listed together on the special issue website. Research articles, review articles as well as short communications are invited. For planned papers, a title and short abstract (about 100 words) can be sent to the Editorial Office for announcement on this website.

Submitted manuscripts should not have been published previously, nor be under consideration for publication elsewhere (except conference proceedings papers). All manuscripts are thoroughly refereed through a single-blind peer-review process. A guide for authors and other relevant information for submission of manuscripts is available on the Instructions for Authors page. Journal of Risk and Financial Management is an international peer-reviewed open access monthly journal published by MDPI.

Please visit the Instructions for Authors page before submitting a manuscript. The Article Processing Charge (APC) for publication in this open access journal is 1400 CHF (Swiss Francs). Submitted papers should be well formatted and use good English. Authors may use MDPI's English editing service prior to publication or during author revisions.

Keywords

  • Green finance
  • Sustainable finance
  • Ethical finance
  • Sustainable investing and sustainable funds
  • Impact investing
  • Active ownership
  • Corporate social responsibility
  • Environmental, social and governance (ESG) performance
  • ESG impact measures of portfolios
  • Green bonds, climate bonds and social bonds
  • Innovative financial instruments
  • Socially responsible investments
  • Microfinance

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Published Papers (12 papers)

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Research

22 pages, 357 KiB  
Article
Sustainability in the European Union: Analyzing the Discourse of the European Green Deal
by Eva Eckert and Oleksandra Kovalevska
J. Risk Financial Manag. 2021, 14(2), 80; https://doi.org/10.3390/jrfm14020080 - 17 Feb 2021
Cited by 83 | Viewed by 17487
Abstract
In the European Union, the concern for sustainability has been legitimized by its politically and ecologically motivated discourse disseminated through recent policies of the European Commission and the local as well as international media. In the article, we question the very meaning of [...] Read more.
In the European Union, the concern for sustainability has been legitimized by its politically and ecologically motivated discourse disseminated through recent policies of the European Commission and the local as well as international media. In the article, we question the very meaning of sustainability and examine the European Green Deal, the major political document issued by the EC in 2019. The main question pursued in the study is whether expectations verbalized in the Green Deal’s plans, programs, strategies, and developments hold up to the scrutiny of critical discourse analysis. We compare the Green Deal’s treatment of sustainability to how sustainability is presented in environmental and social science scholarship and point out that research, on the one hand, and the politically motivated discourse, on the other, do not correlate and often actually contradict each other. We conclude that sustainability discourse and its keywords, lexicon, and phraseology have become a channel through which political institutions in the EU such as the European Commission sideline crucial environmental issues and endorse their own presence. The Green Deal discourse shapes political and institutional power of the Commission and the EU. Full article
(This article belongs to the Special Issue Green and Sustainable Finance)
58 pages, 5356 KiB  
Article
How Integrated are Regional Green Equity Markets? Evidence from a Cross-Quantilogram Approach
by Linh Pham
J. Risk Financial Manag. 2021, 14(1), 39; https://doi.org/10.3390/jrfm14010039 - 17 Jan 2021
Cited by 15 | Viewed by 3147
Abstract
Rising concerns over climate change have increased investors’ and policymakers’ interests in environmentally friendly investments, which have led to the rapid expansion of the green equity market recently. Previous studies have focused on analyzing the green equity market at the aggregate level, thereby [...] Read more.
Rising concerns over climate change have increased investors’ and policymakers’ interests in environmentally friendly investments, which have led to the rapid expansion of the green equity market recently. Previous studies have focused on analyzing the green equity market at the aggregate level, thereby overlooking the heterogeneity across green equity sub-sectors. This paper contributes to the literature by investigating how interdependence between green equity markets and other financial assets varies across regions, market conditions, and investment horizons. To this end, the paper employs the recently developed cross-quantilogram framework, which measures the cross-quantile dependence across time series without any moment condition requirement. The results show that within the green equity market, movements in the U.S. market can predict movements in the Asian and European markets during all market conditions. In contrast, the Asian and European green equity markets only predict movements in the U.S. market during bearish periods. The paper also finds that regional green equity markets respond differently to movements in other financial assets, such as energy commodity and general stock returns. In addition, the interdependence among regional green equity and other assets varies across market conditions and investment horizons. These results have important implications for environmentally friendly investors and policymakers. Full article
(This article belongs to the Special Issue Green and Sustainable Finance)
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22 pages, 669 KiB  
Article
Which Sustainability Dimensions Affect Credit Risk? Evidence from Corporate and Country-Level Measures
by Lutfi Abdul Razak, Mansor H. Ibrahim and Adam Ng
J. Risk Financial Manag. 2020, 13(12), 316; https://doi.org/10.3390/jrfm13120316 - 10 Dec 2020
Cited by 20 | Viewed by 6179
Abstract
Amid growing concern over sustainability issues, there is increasing demand to incorporate environmental and social issues into assessments of credit risk, the possibility of loss resulting from a borrower’s failure to meet their financial obligations. In this paper, we sought to identify empirical [...] Read more.
Amid growing concern over sustainability issues, there is increasing demand to incorporate environmental and social issues into assessments of credit risk, the possibility of loss resulting from a borrower’s failure to meet their financial obligations. In this paper, we sought to identify empirical evidence of a relationship between sustainability measures and credit risk. We contribute to this literature in three main ways: firstly, by using a measure that considers the financial materiality of sustainability issues across different industries; secondly, by using corporate default swap (CDS) spreads as a market-based measure of credit risk; and thirdly, by exploring the context-dependent nature of the relationship. Though the extent differs across industries, our results suggest risk-reducing effects across several corporate sustainability dimensions: climate change; natural resource use; human capital and corporate governance. Furthermore, we found that country sustainability plays a moderating role in the nexus between corporate sustainability and credit risk. Hence, a one-size-fits-all policy may not be suitable in developing the credit-relevant standardization of sustainability factors. Nevertheless, the robustness of corporate governance throughout our findings suggests that corporations should strengthen governance frameworks and procedures prior to embarking on environmental and social objectives to mitigate credit risk. Full article
(This article belongs to the Special Issue Green and Sustainable Finance)
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Graphical abstract

24 pages, 1316 KiB  
Article
The Architecture of Financial Networks and Models of Financial Instruments According to the “Just Transition Mechanism” at the European Level
by Otilia Manta, Kostas Gouliamos, Jie Kong, Zhou Li, Nguyen Minh Ha, Rajendra Prasad Mohanty, Hongmei Yang, Ruihui Pu and Xiao-Guang Yue
J. Risk Financial Manag. 2020, 13(10), 235; https://doi.org/10.3390/jrfm13100235 - 1 Oct 2020
Cited by 5 | Viewed by 4162
Abstract
At the global level and in particular the European level, challenges related to climate change and the transition to green transactions have created an imperative where identifying or developing innovative financial instruments, appropriate for these priorities, have become our research priorities and objectives. [...] Read more.
At the global level and in particular the European level, challenges related to climate change and the transition to green transactions have created an imperative where identifying or developing innovative financial instruments, appropriate for these priorities, have become our research priorities and objectives. Starting from the analysis of the European Investment Plan for green transactions, as well as the EU Directive 2018/410 of the European Parliament and of the Council, in conjunction with ongoing efforts to identify innovative financing tools, research is presented based on hypotheses using concepts and models of green financing. The paper aims to analyze the main concepts and phenomena that could be considered generative factors for current financial market trends, as well as the inventory of facts and acts that provide a picture of the financial market. Based on these investigations, this paper suggest how we can best analyze the economic environment, processes, and resources in terms of their predictions regarding the sustainability of financial markets in the context of current challenges. Moreover, our paper aims to highlight in our empirical research the above-mentioned aspects, including the analysis of the emergence of new financial instruments at the global level with a direct impact on financial sustainability at the European level, including reflecting certain particularities of financial markets Romania. This research will be both a scientific contribution to the specialized literature and a possible support tool for the practical activities of entrepreneurs in their economic endeavor of developing sustainable businesses. Full article
(This article belongs to the Special Issue Green and Sustainable Finance)
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14 pages, 259 KiB  
Article
The Investment Performance of Ethical Equity Funds in Malaysia
by Fadillah Mansor, M. Ishaq Bhatti, Shafiqur Rahman and Hung Quang Do
J. Risk Financial Manag. 2020, 13(9), 219; https://doi.org/10.3390/jrfm13090219 - 21 Sep 2020
Cited by 12 | Viewed by 4385
Abstract
This paper investigates the investment performance of Malaysian Islamic equity funds and a matching sample of conventional equity funds relative to their market benchmark. An integrated model is used to simultaneously capture the market timing and selectivity skills of fund managers. Our findings [...] Read more.
This paper investigates the investment performance of Malaysian Islamic equity funds and a matching sample of conventional equity funds relative to their market benchmark. An integrated model is used to simultaneously capture the market timing and selectivity skills of fund managers. Our findings indicate that the Islamic funds do not match the performance of the conventional funds in terms of selectivity skill. However, Islamic funds perform no worse than their conventional counterparts in market timing, although neither outperform the market. These findings have crucial implications not only for fund managers’ investment decisions, but also for sensitive shariah-compliant investors and risk-seeking investors of Islamic equity funds in their investment portfolio preference. Full article
(This article belongs to the Special Issue Green and Sustainable Finance)
12 pages, 222 KiB  
Article
Survey of Green Bond Pricing and Investment Performance
by K. Thomas Liaw
J. Risk Financial Manag. 2020, 13(9), 193; https://doi.org/10.3390/jrfm13090193 - 26 Aug 2020
Cited by 25 | Viewed by 10943
Abstract
Green bonds are similar to conventional bonds but are specifically earmarked to raise money to finance climate or environmental projects. There have been anecdotes of green bonds being priced tighter than similar conventional bonds by the same issuers. Our survey of academic literature [...] Read more.
Green bonds are similar to conventional bonds but are specifically earmarked to raise money to finance climate or environmental projects. There have been anecdotes of green bonds being priced tighter than similar conventional bonds by the same issuers. Our survey of academic literature indicates that most papers show the yield of a green bond is lower than that of the equivalent conventional bond at issuance (also known as green premium or greenium). However, green bond pricing studies by Climate Bonds Initiative produce mixed results. The conflicting results are likely explained by differences in sample selections, time periods, methodologies, and the properties of the respective issuing entity and the bond. In addition, we examine investment returns from select green bond funds and green bond indexes. The assets under management of those funds are still small and they underperform their benchmark indexes. Full article
(This article belongs to the Special Issue Green and Sustainable Finance)
23 pages, 352 KiB  
Article
Corporate Social Responsibility, Trade Credit and Financial Crisis
by Asif Saeed and Qasim Zureigat
J. Risk Financial Manag. 2020, 13(7), 144; https://doi.org/10.3390/jrfm13070144 - 3 Jul 2020
Cited by 9 | Viewed by 4056
Abstract
Socially responsible firms receive more finance and have been well researched in the corporate finance literature. In this paper, we examine the relationship between CSR and trade credit. Using data from the US manufacturing industry, we find that CSR has a significant positive [...] Read more.
Socially responsible firms receive more finance and have been well researched in the corporate finance literature. In this paper, we examine the relationship between CSR and trade credit. Using data from the US manufacturing industry, we find that CSR has a significant positive association with the buyer and supplier sides of trade credit. During the 2008–2009 financial crisis, the manufacturing industry trade badly fell. We also argue and find evidence that, during crisis, CSR is negatively associated with trade credit. These findings are robust for alternate proxies of CSR and trade credit, sample selection, and time period. Moreover, the potential endogeneity concerns do not affect our results. Finally, we show that this relationship exists for both domestic and multinational firms’ subsamples. Overall, our results indicate that firms with high social performance use more trade credit to increase their business activity. Full article
(This article belongs to the Special Issue Green and Sustainable Finance)
18 pages, 847 KiB  
Article
Capital Structure as a Mediating Factor in the Relationship between Uncertainty, CSR, Stakeholder Interest and Financial Performance
by Ahmed Imran Hunjra, Peter Verhoeven and Qasim Zureigat
J. Risk Financial Manag. 2020, 13(6), 117; https://doi.org/10.3390/jrfm13060117 - 5 Jun 2020
Cited by 8 | Viewed by 5990
Abstract
We examine the mediating role of capital structure in the perceived relationship of uncertainty, corporate social responsibility (CSR), stakeholder interest and financial performance. We collect data through questionnaires, and survey the Chief Financial Officers (CFOs) of the service sector of Pakistan. We apply [...] Read more.
We examine the mediating role of capital structure in the perceived relationship of uncertainty, corporate social responsibility (CSR), stakeholder interest and financial performance. We collect data through questionnaires, and survey the Chief Financial Officers (CFOs) of the service sector of Pakistan. We apply Structure Equation Modeling (SEM) for data analysis. We find that CFOs perceive uncertainty, CSR and stakeholder interest to have both direct and indirect impacts on financial performance. In particular, we find evidence of the mediating effect of capital structure in the relationship. Our findings imply that firms screen out uncertain situations while making capital structure decision and pursuing CSR-related activities. Full article
(This article belongs to the Special Issue Green and Sustainable Finance)
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26 pages, 2336 KiB  
Article
What Future for the Green Bond Market? How Can Policymakers, Companies, and Investors Unlock the Potential of the Green Bond Market?
by Pauline Deschryver and Frederic de Mariz
J. Risk Financial Manag. 2020, 13(3), 61; https://doi.org/10.3390/jrfm13030061 - 24 Mar 2020
Cited by 106 | Viewed by 33873
Abstract
The green bond market is attracting new issuers and a more diversified base of investors. However, the size of the green bond market remains small compared to the challenges it is meant to address and to the overall traditional bond market. This paper [...] Read more.
The green bond market is attracting new issuers and a more diversified base of investors. However, the size of the green bond market remains small compared to the challenges it is meant to address and to the overall traditional bond market. This paper is based on a unique methodology combining an extensive literature review, market data analysis, and interviews with a large spectrum of green bond market participants. We identify the current barriers explaining the lack of scalability of the green bond market: a deficit of harmonized global standards; risks of greenwashing; the perception of higher costs for issuers; the lack of supply of green bonds for investors; and the overall infancy of the market. This paper makes several recommendations to overcome these obstacles and unlock the full potential of green bonds to finance sustainability goals. Full article
(This article belongs to the Special Issue Green and Sustainable Finance)
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15 pages, 254 KiB  
Article
How Do Corporate Social Responsibility and Corporate Governance Affect Stock Price Crash Risk?
by Ahmed Imran Hunjra, Rashid Mehmood and Tahar Tayachi
J. Risk Financial Manag. 2020, 13(2), 30; https://doi.org/10.3390/jrfm13020030 - 7 Feb 2020
Cited by 31 | Viewed by 9308
Abstract
We investigate the impact of corporate social responsibility (CSR) and corporate governance on stock price crash risk in manufacturing sector of India and Pakistan. We collect data of nine years from 2010 to 2018 from DataStream of 353 manufacturing firms. We apply the [...] Read more.
We investigate the impact of corporate social responsibility (CSR) and corporate governance on stock price crash risk in manufacturing sector of India and Pakistan. We collect data of nine years from 2010 to 2018 from DataStream of 353 manufacturing firms. We apply the Generalized Method of Moments (GMM) to the analysis of the data. We find that when firms actively engage in CSR activities, they lead to reduced stock price crash risk. We further find that managerial ownership has a significant positive impact on stock price crash risk, while board size and CEO duality show a significant and negative impact on stock price crash risk. Full article
(This article belongs to the Special Issue Green and Sustainable Finance)
21 pages, 509 KiB  
Article
Corporate Green Bond Issuances: An International Evidence
by Martin Lebelle, Souad Lajili Jarjir and Syrine Sassi
J. Risk Financial Manag. 2020, 13(2), 25; https://doi.org/10.3390/jrfm13020025 - 4 Feb 2020
Cited by 55 | Viewed by 15535
Abstract
Using an international sample of corporate Green bond issuances over the recent period, this paper highlights the potential consequences of the issuance of a Green bond on the issuer’s financial performance. Starting with a first sample of 2079 Green bond issuances of 190 [...] Read more.
Using an international sample of corporate Green bond issuances over the recent period, this paper highlights the potential consequences of the issuance of a Green bond on the issuer’s financial performance. Starting with a first sample of 2079 Green bond issuances of 190 unique issuers from 2009 to 2018, we investigate only corporate green bond issuances. Our final sample contains 475 green bonds issued by 145 unique firms. We find that the market reacts negatively to the announcement of green bond issuances. In particular, results show that the stock market reacts on the day of the green bond announcement date and the day after, and that the cumulative abnormal return is between −0.5% and −0.2%, depending on the asset pricing model (CAPM, the 3-factor Fama and French models, and the 4-factor Carhart models). This effect is mainly noticeable at the first Green Bond issuance and in developed markets. Our results provide evidence that the investors react in the same manner for Green bonds as for conventional or convertible bonds. This evidence suggests that green debt offerings convey unfavorable information about the issuing firms. Full article
(This article belongs to the Special Issue Green and Sustainable Finance)
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19 pages, 713 KiB  
Article
The Effects of Environmental Regulation on the Singapore Stock Market
by Huy Pham, Van Nguyen, Vikash Ramiah, Priyantha Mudalige and Imad Moosa
J. Risk Financial Manag. 2019, 12(4), 175; https://doi.org/10.3390/jrfm12040175 - 24 Nov 2019
Cited by 14 | Viewed by 5187
Abstract
This study examines the impact of environmental regulation on the Singapore stock market using the event study methodology. Several asset pricing models are used to estimate sectoral abnormal returns. Additionally, we estimate the change in systematic risk after the introduction of the carbon [...] Read more.
This study examines the impact of environmental regulation on the Singapore stock market using the event study methodology. Several asset pricing models are used to estimate sectoral abnormal returns. Additionally, we estimate the change in systematic risk after the introduction of the carbon tax and related regulation. We conduct various robustness tests, including the Corrado non-parametric ranking test, the Chesney non-parametric conditional distribution approach, a representation of market integration, and Fama–French five-factor model. We find evidence showing that the environmental regulations tend to achieve their desired effects in Singapore in which several big polluters (including industrial metals and mining, forestry and papers, and electrical equipment and services) were negatively affected by the announcements of environmental regulations and carbon tax. In addition, our results indicate that the electricity sector, one of the biggest polluters, was negatively affected by the announcement of environmental regulations and carbon tax. We also find that environmental regulations seem to boost the performance of environmentally-friendly sectors whereby we find the alternative energy industry (focusing on new renewable energy technologies) experienced a sizeable positive reaction following the announcements of these regulations. Full article
(This article belongs to the Special Issue Green and Sustainable Finance)
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