The EU’s “green” finance. Can “exit”, “voice” and “coercion” be enlisted to aid sustainability goals?

49 Pages Posted: 13 Apr 2021

See all articles by David Ramos Muñoz

David Ramos Muñoz

Universidad Carlos III de Madrid

Elia Cerrato

Universidad Complutense de Madrid (UCM) - Colegio Universitario de Estudios Financieros (CUNEF)

Marco Lamandini

University of Bologna - Department of Business Law

Date Written: April 12, 2021

Abstract

Climate change is humanity’s defining problem for this century, and
policymakers are trying to reform finance to aid in that goal. The flurry of activity is
substantial, but is it enough? In this paper we assess the strength of the means chosen to
make finance sustainable, by considering sustainability a “promise”, like the financial
promise to pay a sum of money, or maximize profits, and comparing the means used to
protect one and another promise, using the categories of “Exit”, “Voice” and “Coercion” to
classify different legal tools. Current proposals are primarily based on transparency, and
thus rely primarily on “Exit” mechanisms, and only for some instruments. Since progress is
generally slow and hesitant on mechanisms relying on “Voice” and “Coercion”, and almost
absent in relation to some instruments, we conclude that the current strategy is adequate for
creating a market niche for green finance, but as it stands now it is not credible, as such, for
the broader goal of greening financial markets as a whole.

Keywords: green finance, green promises, exit, voice and coercion mechanisms, EU Green Taxonomy

JEL Classification: K22, K23

Suggested Citation

Ramos Muñoz, David and Cerrato, Elia and Lamandini, Marco, The EU’s “green” finance. Can “exit”, “voice” and “coercion” be enlisted to aid sustainability goals? (April 12, 2021). European Banking Institute Working Paper Series 2021 - no. 90, Available at SSRN: https://ssrn.com/abstract=3824792 or http://dx.doi.org/10.2139/ssrn.3824792

David Ramos Muñoz (Contact Author)

Universidad Carlos III de Madrid ( email )

126, Getafe
Madrid, 28903
Spain

HOME PAGE: http://www.uc3m.es

Elia Cerrato

Universidad Complutense de Madrid (UCM) - Colegio Universitario de Estudios Financieros (CUNEF) ( email )

Leonardo Prieto Castro, 2
Madrid, Madrid 28040
Spain

Marco Lamandini

University of Bologna - Department of Business Law ( email )

via San Giacomo, 3
Bologna, Bologna
Italy

HOME PAGE: http://www.diritto.unibo.it

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