Financial Markets and the Transition to a Low-Carbon Economy Challenging the Dominant Logics

• Published in: Organization & environment Vol. 32; no. 1; pp. 3 - 17
• Main Authors: Louche, Celine, Busch, Timo, Crifo, Patricia, Marcus, Alfred
• Format: Journal Article
• Language: English
• Published: Los Angeles, CA Sage Publications, Inc 01-03-2019; SAGE Publications; SAGE PUBLICATIONS, INC
• Subjects: Carbon; Connectedness; Economics; Finance; Introduction to the Special Issue; Markets; Ownership; Risk adjustment; Securities markets; Speech; low-carbon economy; financial markets; theory of change; climate change
• ISSN: 1086-0266; 1552-7417
• DOI: 10.1177/1086026619831516

Financial markets play a major role in contributing to the transition to a low-carbon economy. Although many initiatives and developments are taking place, this is just the beginning. In this article, we argue for a theory of change—a theory rooted in logics that will help financial markets play a key role in the transition to a low-carbon economy. We argue that the current dominant logics in finance—short-termism, predictability of the future based on ex-post data, price efficiency, and risk-adjusted returns—impede the effective integration of climate considerations in financial markets. We suggest four alternative logics that can enable and foster a change toward the low-carbon economy: long-termism, systems interconnectedness, carbon price dynamics, and active ownership.