Taming Unsustainable Finance : The Perils Of Modern Risk Management

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http://hdl.handle.net/10138/312357

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Cullen , J & Mähönen , J T 2019 , Taming Unsustainable Finance : The Perils Of Modern Risk Management . in B Sjåfjell & C M Bruner (eds) , The Cambridge Handbook of Corporate Law, Corporate Governance and Sustainability . , 8 , Cambridge Law Handbooks , Cambridge University Press , Cambridge , pp. 100-113 . https://doi.org/10.1017/9781108658386.013

Title: Taming Unsustainable Finance : The Perils Of Modern Risk Management
Author: Cullen, Jay; Mähönen, Jukka Tapio
Editor: Sjåfjell, Beate; Bruner, Christopher M.
Contributor: University of Helsinki, Faculty of Law
Publisher: Cambridge University Press
Date: 2019-11
Language: eng
Number of pages: 14
Belongs to series: The Cambridge Handbook of Corporate Law, Corporate Governance and Sustainability
Belongs to series: Cambridge Law Handbooks
ISBN: 9781108473293
9781108658386
9781108589208
URI: http://hdl.handle.net/10138/312357
Abstract: A traditional response to information asymmetries in financial markets has been to require disclosure and heightened transparency in investment chains. We argue in this chapter that the trust placed in such regulatory techniques will fail to deliver sustainable investment for two reasons. The first is the structure of equity markets, which are focused on shareholder returns and excessive turnover of portfolios, preventing meaningful engagement with companies. The second is that both investors and intermediaries make a category error in placing trust in modern risk management to quantify the financial risks from climate change and other environmental changes. Our analysis leads us logically to three micro- and macroprudential policy prescriptions, namely: increasing the capital requirements on assets with so-called ‘brown’ credentials; reforming bank stress tests to reflect the uncertain financial implications of environmental damage; and pivoting central bank bond buying programmes toward green financial assets.
Subject: 513 Law
uncertainty
risk
climate change
banks
financial markets
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