Finance, Sustainability and Negative Externalities. An Overview of the European Context

Abstract

The goal of the paper is to examine the relation between finance and sustainability, with a special emphasis on the impact of negative externalities. Sustainable development as a concept aims to mitigate negative externalities. Conventional finance offers no room for the environment and society. Therefore, three-dimensional sustainable finance has appeared. This paper is the first original attempt to examine the relationship between: financial, economic, environmental and social development indicators from the sustainability perspective, with a special focus on externalities. To study the disparities between the European Union (EU) countries belonging to the OECD in the field of sustainable development and sustainable finance, the multi-criteria taxonomy was used. The basis of the analyses was the indicators transformed according to the relative taxonomy method. The database, based on Eurostat, contains indicators describing pillars of sustainable development such as: economic (12 indicators), social (28), environmental (7) and sustainable finance (16). The study analyses the sample of 23 countries in 2007, 2013 and 2016. The results confirm a positive relationship among the analysed indicators. On the basis of 62 statistical features selected according to the statistical methods, 7 groups of countries were obtained in 2007 and 2013 and 8 groups in 2016. In the case of Scandinavian countries, one can observe a permanent separation of economic growth from its negative impact on the natural environment. Such dependencies are no longer so obvious in the case of other EU countries belonging to the Organization for Economic Cooperation and Development (OECD). Therefore, attention should be paid to the most economically developed countries in Western Europe, i.e., Belgium, Germany, Luxembourg, the Netherlands and the United Kingdom, whose high rankings in the case of economic, social and very often also financial results correspond to much worse results in the case of environmental development.

Patterns of Interdependence between Financial Development, Fiscal Instruments, and Environmental Degradation in Developed and Converging EU Countries

“…Explanatory variables were divided into three groups distinguishing variables that represent financial sector development, related fiscal and socioeconomic conditions, and research and development activities by governments in the linked fields. The study was based on the selected indicators used to monitor the implementation of the objectives of the Agenda for Sustainable Development 2030 (Agenda 2030) [18,19]. They are presented in Table 1.…”

The Role of Sustainable Finance in Achieving Sustainable Development Goals: Does It Work?

“…The general definition of sustainable finance explains this kind of finance as finance that takes into consideration ESG factors into financial decision-making (Schoenmaker, 2017). The subcategories of sustainable finance refer to major forms of environmental degradation, and inequalities that are part of definitions of sub-disciplines of sustainable finance (Ziolo et al, 2019).…”

Link between Energy Efficiency and Sustainable Economic and Financial Development in OECD Countries

“…In our study, the censored dependent variable mean efficiency score Z kt ∈ [0, 1] was calculated by the DEA window analysis at the first stage. The Tobit regression model for panel data [61,72,73] is given by Equations (7) and 8:…”

“…Sustainable finance contributes to sustainable development because it consists of environmental, social and governance criteria. Ziolo et al [7] confirmed a positive link between sustainable finance and the three pillars of sustainable development. Public and private funding (blended finance, social impact investing and green finance) are mostly mobilised to fit sustainable development goals.…”