Title of the project: Climate change and global finance at the crossroads: Policy challenges, politico-economic dynamics, and sustainable transformation

Financed by:

Federal Ministry of Education and Research (BMBF), Bonn

Project lead:

Prof Dr Joscha Wullweber, Heisenberg-Professor

Project team:

Nicolas Aguila; Riccardo Baioni; Jan Fichtner; Paula Haufe; Simon Schairer; Janina Urban

Cooperation partner:

Institut für ökologische Wirtschaftsforschung: IÖW - Berlin

Summary of the project:

Humanity is facing a millennium challenge: the transformation of state, industry, and society towards zero CO2 emissions in the next 20 to 30 years. This goal can only be achieved if appropriate financial resources are available. The financial sector, however, is struggling to steer financial flows towards sustainable investments. Although the risk is extremely high that CO2 intensive assets will lose much of their value in future years, they still generate too much profit in the near term to expect financial players not to continue investing heavily in them. It is therefore crucial for public authorities and civil society to create incentive structures and regulatory corridors to effectively motivate the financial industry to strengthen their efforts toward solutions that will limit the causes of climate change.

The aim of the project is

(a) to develop an interdisciplinary and multi-method analytical framework appropriate for studying the connections between the financial sector and climate change,

(b) to apply this framework to obtain, process, and analyse relevant data in this connection

(c) to evaluate the internal financial market dynamics and the responsiveness of financial actors related to (c1) regulations, (c2) climate/fiscal policy, (c3) monetary policy, and (c4) civil society demands and campaigns,

(d) to examine the interplay and reflexivity of each of these areas with and among one another, and, on the basis of the prospective findings, (e) to draft realistic proposals for policy instruments and strategies designed to incentivize the financial sector towards sustainable investments, and

(f) to make concrete policy recommendations (policy mixes) on ways to accelerate the transition to a low carbon financial system.

The project is subdivided into four work packages (WPs):

WP 1: Financial actors and logics of sustainable finance: impediments and positive drivers towards sustainable finance

WP 2: Central bank policies, government climate/fiscal policies, and the financial sector

WP 3: Civil society and climate finance

WP 4: Project management, Policy Innovation Lab (PIL), stakeholder dialogues, and public outreach.