Towards a Theory of Sustainable Finance

Working Paper

Authors: Joakim Sandberg   

Published By: UNEP Inquiry   

Date: Oct 2015

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Towards a Theory of Sustainable Finance


The paper is normative rather than descriptive. It does not review how the financial system currently functions, but rather how it ought to function in the future. It draws upon concepts, theories and arguments from the literature in both theoretical economics and normative philosophy. Its goal is to identify a new direction for finance which the majority of commentators will recognize as both desirable and achievable. The paper proceeds outlines the dominant view of finance and notes some of its strengths and weaknesses. It evaluates contemporary calls for either more regulation  or greater social responsibility by agents themselves. In light of current evidence with both of these suggestions, a new theory is presented which Sandberg calls the two-level model of sustainable finance. Finally, the paper closes with a discussion on what the theory implies in terms of both adequate behaviour by financial agents themselves and effective regulation by the authorities.

[This paper was presented at the UNEP Inquiry/Centre for International Governance Innovation Academic Symposium on the Design of a Sustainable Financial System, held in Waterloo (Canada) in December 2014]

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