The Role of Finance in Greening Economic Development

Volz, Ulrich; Aitken, Damon

Abstract

This chapter discusses the role of the financial sector in greening economic development and the need to align finance with climate and other sustainability goals. Starting with a discussion of prevailing market failures in finance, the chapter makes the case for systematically integrating climate and other environmental risks and impacts in financial decision-making. It highlights the critical role that central banks and supervisors need to play in governing sustainable finance and discusses actions that these institutions may need to take to this end. The chapter also emphasizes the role that public development banks can play in scaling up sustainable investment and in mainstreaming sustainable finance practices and developing sustainable markets.

Citation

Volz, U., & Aitken, D. (2025). The Role of Finance in Greening Economic Development. In J. A. Mathews, & A. Oqubay Metiku (Eds.), The Oxford Handbook on the Greening of Economic Development (295-318). Oxford University Press. https://doi.org/10.1093/oxfordhb/9780198883487.013.19

• Acceptance Date: Feb 12, 2024
• Online Publication Date: May 22, 2025
• Publication Date: May 22, 2025
• Deposit Date: Mar 19, 2025
• Publisher: Oxford University Press
• Pages: 295-318
• Book Title: The Oxford Handbook on the Greening of Economic Development
• ISBN: 9780198883487
• DOI: https://doi.org/10.1093/oxfordhb/9780198883487.013.19
• Keywords: state investment banks, green finance, patient finance, mission-oriented policy, innovation