Literature review of green finance

The academic investigation into green finance traces its roots back to the broader environmental movement of the 1970s. Initially, this research primarily revolved around conceptual frameworks linking financial markets and environmental sustainability. Early academic explorations were focused on understanding the potential roles of financial systems in addressing environmental challenges, laying the groundwork for what would later become green finance.

A seminal contribution during this period was the work of Schmidheiny and Zorraquin (1996), which offered one of the earliest insights into the role of financial markets in sustainable development. Schmidheiny argued that sustainable development requires a shift in how businesses and financial markets operate, emphasizing the need for integrating environmental considerations into economic and financial decision-making processes. This early work was instrumental in establishing a conceptual link between finance and environmental sustainability.

Concurrently, academic discourses began to emphasize the importance of ‘sustainable development’, a term popularized by the Brundtland Report in 1987 (Brundtland et al., 1987). The report articulated the need for development that meets the needs of the present without compromising the ability of future generations to meet their own needs, thereby integrating economic, social, and environmental dimensions.

These early explorations laid the foundation for later academic work in green finance. Researchers began to critically analyze traditional financial systems, identifying the gaps and opportunities for enhancing environmental sustainability through financial mechanisms. This period saw the emergence of various theories and models proposing how financial markets could be reoriented to support sustainable development objectives.