Research Handbook of Finance and Sustainability
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Research Handbook of Finance and Sustainability

Edited by Sabri Boubaker, Douglas Cumming and Duc K. Nguyen

The severe consequences of the global financial crisis 2008-2009 and numerous accounting frauds and financial scandals over the last fifteen years have let to calls for more ethical and responsible actions in all economic activities including consumption, investing, governance and regulation. Despite the fact that ethics in business and corporate social responsibility rules have been adopted in various countries, more efforts have to be devoted to motivate and empower more actors to integrate ethical behavior and rules in making business and managerial decisions. The Research Handbook of Finance and Sustainability will provide the readers but particularly investors, managers, and policymakers with comprehensive coverage of the issues at the crossroads of finance, ethics and sustainable development as well as proposed solutions, while focusing on three different levels: corporations, investment funds, and financial markets.
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Chapter 8: The birth of environmental finance

Huy Pham and Vikash Ramiah

Abstract

Environmental economics and accounting are well-established disciplines but environmental finance is in its infancy. In this chapter, we explore how the lessons learnt from economics and accounting literature can be extended to the finance discipline. For instance, the macroeconomic literature suggests that environmental regulations affect employment level, international trade and productivity, which in turn affect the market portfolio/systematic risk. The microeconomics literature implies that the cost and revenue functions of firms are altered – leading to a change in stock prices. The accounting literature focuses on environmental disclosure/performance, which subsequently leads to a change in the market value of the firm. The emerging finance literature shows the persistence of the ‘green effect’ and a risk-shifting behaviour in terms of the diamond risk structure.

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