The transition to a sustainable economy requires investment and thus also capital. Typical examples are investments in improved resource efficiency, cleantech or sustainable mobility. At the same time, financial institutions should increasingly allocate funds according to environmental and social criteria. Innovative financing systems are needed to ensure that economic and social activities do not exceed planetary boundaries while simultaneously increasing welfare. Sustainable finance should motivate companies to invest in projects that are environmentally friendly and improve the welfare of society as a whole.
\n\n
Two projects addressed the financing of cleantech as well as various issues ranging from the feasibility of a Swiss sustainability exchange to why companies issue green bonds.
\n","bild":[],"textNachBild":"","optionen":[],"internerLink":[],"linkText":""}},{"component":"ProjekteTeaser","data":{"id":704,"title":"Projekte","slug":"projekte","link":"/en/dev/part-data/finanzwesen-elemente/projekte","optionen":["inherit"],"projects":[{"id":544,"title":"Sustainable finance","slug":"sustainable-finance","link":"/en/projects/sustainable-finance","tags":[{"id":41,"slug":"company","title":"Company","link":"/en/tags/viewpoint/company","group":40},{"id":43,"slug":"politics","title":"Politics","link":"/en/tags/viewpoint/politics","group":40},{"id":1110,"slug":"value-chain","title":"Value chain","link":"/en/tags/focus/value-chain","group":145},{"id":1111,"slug":"policy-instruments-and-legal-framework","title":"Policy instruments and legal framework","link":"/en/tags/focus/policy-instruments-and-legal-framework","group":145},{"id":1114,"slug":"green-jobs-and-the-labour-market","title":"Green Jobs and the Labour Market","link":"/en/tags/focus/green-jobs-and-the-labour-market","group":145}],"vorschaubild":{"id":76,"alt":false,"caption":false,"small":"https://nfp73.b-cdn.net/public/images/gallery/preview_62df7f2a19fed.jpg","normal":"https://nfp73.b-cdn.net/public/images/gallery/normal_62df7f2a19fed.jpg","large":"https://nfp73.b-cdn.net/public/images/gallery/retina_full_62df7f2a19fed.jpg"},"kontakt":"Prof. Dr. Jean-Charles Rochet","optionen":[],"technicalName":"","projektLink":"","topic":95,"sdg":299,"color":"#EC640F","parts":[{"component":"TextBild","data":{"id":546,"title":"Sustainable finance","slug":"intro","link":"","textVorBild":"","bild":{"id":76,"alt":false,"caption":false,"small":"https://nfp73.b-cdn.net/public/images/gallery/preview_62df7f2a19fed.jpg","normal":"https://nfp73.b-cdn.net/public/images/gallery/normal_62df7f2a19fed.jpg","large":"https://nfp73.b-cdn.net/public/images/gallery/retina_full_62df7f2a19fed.jpg"},"textNachBild":"","optionen":["cropped"],"internerLink":[],"linkText":""}},{"component":"MediaTeaser","data":{"id":628,"title":"Media and news","slug":"medien-und-neuigkeiten","link":"/en/dev/part-data/nachhaltiges-finanzierungswesen-elemente/medien-und-neuigkeiten","media":[{"id":1188,"title":"Rochet - New Approaches to Sustainable Finance","slug":"rochet-new-approaches-to-sustainable-finance","link":"https://www.youtube.com/watch?v=2Lcm7RIMZHs","bild":{"id":1035,"alt":false,"caption":false,"small":"https://nfp73.b-cdn.net/public/images/gallery/preview_633586a180e3e.jpg","normal":"https://nfp73.b-cdn.net/public/images/gallery/normal_633586a180e3e.jpg","large":"https://nfp73.b-cdn.net/public/images/gallery/retina_full_633586a180e3e.jpg"},"datum":"2018-01-31","type":"videos","parent":907}],"optionen":["parent"]}},{"component":"TextBild","data":{"id":629,"title":"Background","slug":"hintergrund","link":"","textVorBild":"
Background
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Knowledge about sustainable finance has steadily increased over the past few decades. Yet the mainstream economic literature still perceives firms as entities that solely seek to maximise profits and are insensitive to ESG (environmental, social and governance) considerations. Because of this, research has largely neglected the impact of institutional investors, such as banks and pension funds, on ESG. In terms of financing, a Swiss social stock exchange still needs to be implemented in order to further provide funding for microfinance further initiatives.
The aim of this project was to build on the current state of research and make both scientific and practical contributions. We aimed to accomplish this by increasing the quantity and quality of available knowledge, devising sustainable policies rooted in scientific evidence, and implementing an operational Swiss sustainable stock exchange that will support ESG initiatives by offering financing opportunities to microfinance investment vehicles and microfinance institutions.
The first subproject showed that green finance certification allows managers to signal firms' efficiency at addressing the energy transition. In our model of green bond issuance, signalling amplifies incentives to decarbonise. The model predicts that firms' managers are more inclined to issue green bonds when they are more interested in stock prices. We tested this prediction by exploiting cross-industry differences in the stock-price sensitivity of managers' compensation and cross-country variations in actual carbon prices.
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Sustainability footprint of institutional investors
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The second subproject, which focused on the sustainability footprint of institutional investors, provided the following key results:
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Institutional investors play a prominent role in promoting sustainability in the economy.
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Some institutional investors claim to promote sustainability, but do not do so in practice.
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On the methodological side, we see that there is substantial heterogeneity in ESG data vendors’ ratings.
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High ESG rating disagreement is perceived as an additional source of uncertainty by financial investors.
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Sustainable microfinance
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The third subproject, which focused on sustainable microfinance, provided the following key results:
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Off-grid solar energy (OGS) is instrumental to achieving access to affordable, reliable, sustainable and modern energy for low-income unbanked household enterprises in the South (Sustainable Development Goal 7 (SDG7)).
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Access to finance is vital to ensure provision with off-grid solar energy.
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In the last decade, substantial progress had been made towards SDG7, half of it thanks to OGS start-ups reaching around 500 million households.
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Pay-as-you-go financing schemes are highly successful and receive 85% of all solar investments; however, scaling up remains difficult, in particular with the challenges posed by Covid-19.
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The global crisis brought about by Covid-19 reduces OGS customers’ ability to pay, disrupts OGS value chains and freezes capital flows into the sector.
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A sustainable social stock exchange in Switzerland
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The last subproject, which focused on creating a social stock exchange in Switzerland, provided the following key results:
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A large market for both social businesses and impact investors exists at the global level.
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Existing initiatives to create social stock markets have shown that implementation is challenging.
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A successful Swiss social stock exchange needs to establish strategic partnerships and concentrate on impact verification, pipeline building and impact measurement.
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Developing a stand-alone and fully fledged infrastructure from scratch is not recommended.
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\n","bild":[],"textNachBild":"","optionen":["highlighted"],"internerLink":[],"linkText":""}},{"component":"TextBild","data":{"id":631,"title":"Implications for research","slug":"bedeutung","link":"","textVorBild":"
Implications for research
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The following key implications have been determined for research:
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The effect of managers' incentives on green bond issuance increases with carbon penalties. Our results suggest that green bonds are complements to, rather than substitutes for, carbon taxes.
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It is important to detect and measure the externalities related to greenwashing among institutional investors who use sustainable finance motives as a commercial device to attract flows from uninformed clients.
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The collective intelligence of stakeholders in the off-grid solar energy sector is likely instrumental in enabling the sector to weather the long-term impact of the Covid-19 pandemic.
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\n","bild":[],"textNachBild":"","optionen":[],"internerLink":[],"linkText":""}},{"component":"TextBild","data":{"id":1250,"title":"Implications for practice","slug":"bedeutung-fuer-die-praxis","link":"","textVorBild":"
Implications for practice
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The following key implications have been determined for practice:
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Green finance instruments should be complemented with managers’ green compensation packages, giving them direct incentives to decarbonise their activities.
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Asset managers cannot simply rely on sustainability labels when assessing the sustainability credentials of investment managers.
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The solar off-grid sector is likely to engender more concentration and specialisation. Covid-19 may reduce the number of investors and their appetite for taking risks, increasing the scope for blended finance.
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The creation of a successful Swiss social stock exchange will require taking away an entrepreneurial dimension from a traditional NGO-led one.
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\n","bild":[],"textNachBild":"","optionen":[],"internerLink":[],"linkText":""}},{"component":"Publikationen","data":{"id":1145,"title":"Publications","slug":"publikationen","link":"/en/dev/part-data/nachhaltiges-finanzierungswesen-elemente/publikationen","optionen":[],"altLink":"","altDatei":[],"project":544}},{"component":"PersonTeaser","data":{"id":547,"title":"Contact","slug":"kontakt","link":"/en/dev/part-data/nachhaltiges-finanzierungswesen-elemente/kontakt","person":{"id":503,"title":"Prof. Dr. Jean-Charles Rochet","slug":"prof-dr-jean-charles-rochet","link":"/en/people/prof-dr-jean-charles-rochet","bild":{"id":910,"alt":false,"caption":false,"small":"https://nfp73.b-cdn.net/public/images/gallery/preview_630ef9c65ee3d.jpg","normal":"https://nfp73.b-cdn.net/public/images/gallery/normal_630ef9c65ee3d.jpg","large":"https://nfp73.b-cdn.net/public/images/gallery/retina_full_630ef9c65ee3d.jpg"},"name":"Prof. Dr. Jean-Charles Rochet","email":"jean-charles.rochet@unige.ch","telefon":"+41 22 379 97 58","addresse":"
Boulevard du Pont d’Arve 42 \n1211 Geneva
\n","institut":"
School of Economics and Management, Université de Genève and Swiss Finance Institute
As a practitioner involved in the development of sustainable finance regulatory frameworks in Europe, I found the results of the research project eye-opening. They indicate the need for an innovative and sustainable marketplace which will improve the financing options for sustainable companies. These findings served as an important impulse for the creation of the Swiss social stock exchange (SWISOX).
iGravity was mandated by Sustainable Finance Geneva to conduct the feasibility study for a Swiss social stock exchange (SWISOX). We all know how important it is that high impact enterprises are able to access much needed financing to grow and scale their operations. As most investors – despite increased interest for impact investments – require liquidity and security to invest, the notion of SWISOX that eases access and provides liquidity and certainty on what constitutes impact investments is definitively a game changer for the industry.
\n","author":"Patrick Elmer","institution":"iGravity","role":"CEO and founder"}}}}],"intro":"
In this project, we examined how green bonds can influence corporate choices of “green” investment projects. Furthermore, we quantified the environmental and social footprints of institutional investors’ portfolio holdings and examined whether they invest responsibly when they claim they do. The focus lay on ways to improve access to financial capital for microfinance investment vehicles and institutions and on the possible implementation of a Swiss social stock exchange.
\n"},{"id":119,"title":"Financing clean tech","slug":"financing-clean-tech","link":"/en/projects/financing-clean-tech","tags":[{"id":41,"slug":"company","title":"Company","link":"/en/tags/viewpoint/company","group":40},{"id":43,"slug":"politics","title":"Politics","link":"/en/tags/viewpoint/politics","group":40},{"id":1108,"slug":"ecodesign-business-models-and-production","title":"Ecodesign, business models and production","link":"/en/tags/focus/ecodesign-business-models-and-production","group":145},{"id":1110,"slug":"value-chain","title":"Value chain","link":"/en/tags/focus/value-chain","group":145},{"id":1111,"slug":"policy-instruments-and-legal-framework","title":"Policy instruments and legal framework","link":"/en/tags/focus/policy-instruments-and-legal-framework","group":145},{"id":1114,"slug":"green-jobs-and-the-labour-market","title":"Green Jobs and the Labour Market","link":"/en/tags/focus/green-jobs-and-the-labour-market","group":145}],"vorschaubild":{"id":80,"alt":false,"caption":false,"small":"https://nfp73.b-cdn.net/public/images/gallery/preview_62df814391975.jpg","normal":"https://nfp73.b-cdn.net/public/images/gallery/normal_62df814391975.jpg","large":"https://nfp73.b-cdn.net/public/images/gallery/retina_full_62df814391975.jpg"},"kontakt":"Dr. Joëlle Noailly","optionen":[],"technicalName":"","projektLink":"","topic":95,"sdg":299,"color":"#EC640F","parts":[{"component":"TextBild","data":{"id":556,"title":"Financing clean tech","slug":"intro","link":"","textVorBild":"","bild":{"id":80,"alt":false,"caption":false,"small":"https://nfp73.b-cdn.net/public/images/gallery/preview_62df814391975.jpg","normal":"https://nfp73.b-cdn.net/public/images/gallery/normal_62df814391975.jpg","large":"https://nfp73.b-cdn.net/public/images/gallery/retina_full_62df814391975.jpg"},"textNachBild":"","optionen":["cropped"],"internerLink":[],"linkText":""}},{"component":"MediaTeaser","data":{"id":643,"title":"Media and news","slug":"medien-und-neuigkeiten","link":"/en/dev/part-data/finanzierung-von-cleantech-elemente/medien-und-neuigkeiten","media":[{"id":1336,"title":"Podcast E9: Policy uncertainty hinders clean tech investments ...","slug":"podcast-e9-policy-uncertainty-hinders-clean-tech-investments","link":"https://open.spotify.com/episode/4XesvRNUtGgqEsR5n7lXm0?si=641add32375e4e74","bild":{"id":1163,"alt":false,"caption":false,"small":"https://nfp73.b-cdn.net/public/images/gallery/preview_64060357238bd.jpg","normal":"https://nfp73.b-cdn.net/public/images/gallery/normal_64060357238bd.jpg","large":"https://nfp73.b-cdn.net/public/images/gallery/retina_full_64060357238bd.jpg"},"datum":"2023-03-06","type":"podcasts","parent":908},{"id":1281,"title":"Completed NRP 73 research project: Financing cleantech","slug":"abgeschlossenes-nfp-73-forschungsprojekt-finanzierung-von-cleantech","link":"/en/mediacenter/news/abgeschlossenes-nfp-73-forschungsprojekt-finanzierung-von-cleantech","datum":"2023-02-24","bild":{"id":1156,"alt":false,"caption":false,"small":"https://nfp73.b-cdn.net/public/images/gallery/preview_63f8944f7a334.jpg","normal":"https://nfp73.b-cdn.net/public/images/gallery/normal_63f8944f7a334.jpg","large":"https://nfp73.b-cdn.net/public/images/gallery/retina_full_63f8944f7a334.jpg"},"type":"news","parent":906},{"id":1189,"title":"Noailly - Financing clean tech","slug":"noailly-financing-clean-tech","link":"https://www.youtube.com/watch?v=jDUdsI52djU","bild":{"id":1036,"alt":false,"caption":false,"small":"https://nfp73.b-cdn.net/public/images/gallery/preview_633586ddc748c.jpg","normal":"https://nfp73.b-cdn.net/public/images/gallery/normal_633586ddc748c.jpg","large":"https://nfp73.b-cdn.net/public/images/gallery/retina_full_633586ddc748c.jpg"},"datum":"2018-01-31","type":"videos","parent":907}],"optionen":["parent"]}},{"component":"TextBild","data":{"id":644,"title":"Hintergrund","slug":"hintergrund","link":"","textVorBild":"
Background
\n\n
In its 2022 special report, the Intergovernmental Panel on Climate Change declared that to limit global warming to 1.5°C above pre‐industrial levels, the world needs to invest $2.3 trillion every year in low‐carbon electricity technologies alone. However, Bloomberg’s New Energy Finance estimates that only $755 billion was invested globally in energy transition sectors in 2021. Greater understanding about the financing of cleantech is thus critical considering the massive amount of investment needed.
The overarching objective of this project was to investigate how society can steer financing towards cleantech investments. Investors still perceive cleantech as risky technologies. Cleantech investments tend to be bets on future demand for climate action that depend on public policies, which are rarely predictable and consistent over time. Clean technologies are also more capital intensive than other high tech and therefore less attractive for traditional incumbent investors. Accordingly, the goals of this project were to investigate: 1) how environmental policy (uncertainty) affects investment in the low‐carbon economy, and 2) whether new financing tools can attract investors to support cleantech start-ups.
The results of the project emphasize the paramount importance of robust and consistent environmental and climate policies to steer investments and create markets for cleantech. The results particularly underline the adverse effects of policy uncertainty, which tends to delay further investments despite the urgency of climate action. In addition, results on new financing tools suggest that venture competition and/or crowdfunding are useful complementary instruments to support clean investments but are no panacea to resolve the funding gap.
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A major achievement of the project is the construction of two novel high‐frequency news‐based indices available for the United States over the last decades providing an improved quantification of various aspects of environmental policy (uncertainty) that are typically hard‐to‐measure.
\n","bild":[],"textNachBild":"","optionen":["highlighted"],"internerLink":[],"linkText":""}},{"component":"TextBild","data":{"id":645,"title":"Implications for research","slug":"bedeutung","link":"","textVorBild":"
Implications for research
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Our news‐based indices and methodology provide many opportunities for future researchers to better examine how specific features of the policy process (e.g. policy announcements, elections) affect investors’ perceptions about the future regulatory framework and help foster (or discourage) future investments in cleantech markets.
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Our contribution on innovative financing tools advances knowledge on the role of venture competition and crowdfunding by adding a specific focus on the case of cleantech start-ups.
\n","bild":[],"textNachBild":"","optionen":[],"internerLink":[],"linkText":""}},{"component":"TextBild","data":{"id":1268,"title":"Implications for practice","slug":"bedeutung-fuer-die-praxis","link":"","textVorBild":"
Implications for practice
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Our indices of environmental policy (uncertainty) can help policymakers and investors to quantify and identify regulatory risks more precisely, and to formulate more robust and consistent climate policies for the benefit of society. Regarding research on financing tools, the study provides practical implications about how to make venture competition more effective for entrepreneurs (e.g., with a high‐quality jury and a money prize aligned with start-ups’ needs) and how governments can help maximize the potential and credibility of crowdfunding platforms.
Dr. Joëlle Noailly \nInstitut des Hautes Etudes Internationales et du Développement, Genève
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Prof. Dr. Gaétan de Rassenfosse \nEPFL
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Project partners
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Carbon Delta
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CleanTech Capital
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CleantechAlps
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Emerald Technology Ventures
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Green Growth Knowledge Platform (GGKP)
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Jadeberg Partners
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OECD
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Switzerland Global Enterprise
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Venture Kick
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The project examined how robust environmental policy and new financing tools can help foster investments in clean technologies (e.g. renewable energy, electric vehicles, …)
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Portrait
Sustainable Cities and Communities
Industry, innovation and infrastructure
Life on land
Responsible consumption and production
Cities and Mobility
Building and Construction
Finance
Circular economy
Forest Management
Supply Chains
Agriculture and Nutrition
Governance
Sustainable Behaviour
Decarbonisation of the transport sector
Post-fossil cities
Co-evolution of business strategies and resource policies in the building industry
Ecological footprint in the housing sector
Financing clean tech
Sustainable finance
Laboratory for circular economy
Towards a sustainable circular economy
Challenges of modular water infrastructure systems
Resource efficiency in Swiss hospitals
Ecosystem services in forests
Trade‐offs in forests
Insurance value of forest ecosystems
Enhancing supply chain sustainability
Sustainable Public Procurement (SPP)
Open assessment of Swiss economy and society
Digital innovations for sustainable agriculture
Impacts of Swiss food consumption and trade
Interaction of economy and ecology in Swiss farms
Switzerland’s sustainability footprint
Sustainable Trade Relations for Diversified Food Systems
Green labour market effects
Voluntary corporate environmental initiatives
Legal framework for a resource-efficient circular economy
Nudging small and medium-sized companies
Rebound Effects of the Sharing Economy
Sustainable consumer behaviour
Extending the lifespan of mobile devices
The influence of environmental identities
Finance
The transition to a sustainable economy requires investment and thus also capital. Typical examples are investments in improved resource efficiency, cleantech or sustainable mobility. At the same time, financial institutions should increasingly allocate funds according to environmental and social criteria. Innovative financing systems are needed to ensure that economic and social activities do not exceed planetary boundaries while simultaneously increasing welfare. Sustainable finance should motivate companies to invest in projects that are environmentally friendly and improve the welfare of society as a whole.
Two projects addressed the financing of cleantech as well as various issues ranging from the feasibility of a Swiss sustainability exchange to why companies issue green bonds.