Article in Journal

Green Finance: From Wishful Thinking to Marginal Impact

Jan Krahnen, Jörg Rocholl, Marcel Thum
CESifo, Munich, 2023

EconPol Forum 24 (1), 8-12
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  • The difficulty of establishing clear links between the origin of funds and their use calls into question the usefulness of ESG-oriented financing
  • Active investors may exert a formative influence on a company’s environmental and social actions, not least by accepting a personal reduction in earnings
  • Passive investors will only be able to exert an influence if there are a large number of green investors and if markets are characterized by frictions and inefficiencies
  • In the case of the state, there is no comparable way for investors to exert an influence, as budget planning remains the preserve of the legislature
  • Combining private efforts towards green finance with public policies may render the former ineffective in achieving ESG goals

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