The RPN on Sustainable Finance, established in June 2021 for an initial three year term, is led by Professor Dirk Schoenmaker (Rotterdam School of Management, Erasmus University, CEPR, and co-author of the textbook Principles of Sustainable Finance, OUP).
Sustainable finance looks at how finance (primary market financing, secondary market trading, and engagement) can foster the transition to a sustainable economy. Primary markets increasingly direct funding – both equity and debt - to companies that embrace sustainable technologies and management practices. Secondary market trading based on sustainability factors causes stock prices to reflect such factors rather than purely financial concerns. In addition to capital allocation, investors can also improve sustainability through voting and engagement. To fulfill these functions, investors and lenders need information on companies’ sustainability performance and impact. Key is to take a sufficiently long horizon, because sustainability is about the future.
The theoretical and policy challenge is to integrate financial, social and environmental factors into decision-making and reporting. The Sustainable Finance Research and Policy Network pursues a broad agenda covering topics in investment analysis (price formation, portfolio-selection, engagement and voting), corporate finance (investment decisions, employee and board compensation and corporate governance), banking (lending decisions, credit risk analysis and loan covenants), corporate reporting (emerging sustainable reporting standards, impact measurement and assurance) and financial regulation (taxonomy, fiduciary duty and capital adequacy framework). Reflecting the growing concerns around climate change, and reacting to the huge financial sector interest in ESG issues and impact measurement, the aim of the first three years of this RPN is to foster research in the area of sustainable finance and to make it mainstream.