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Global Green Finance and Sustainability: Insights for Progressive Strategies

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 Journal für Entwicklungspolitik XXXVI, 4-2020, S. 4–30

Johannes Jäger, L uk as S chmidt

Global Green Finance and Sustainability:
Insights for Progressive Strategies

Abstract Green finance has been increasingly presented as being an

effective solution to global environmental problems and climate change.
However, today’s global financial structures tend to reproduce global inequali-
ties and contribute to continued, highly unequal over-use and destruction of
the environment, as well as a global ecological crisis. This paper introduces
the topic with a specific emphasis on green finance, and provides an over-
view of the contributions to this special issue on Global Finance and Socio-
Ecological Transformation. We discuss the implications of global green finance
and propose a typology that differentiates between neoliberal, reformist and
progressive transformative types of green finance. Based on this, we present
insights for progressive strategies and policies for financing a socio-ecological
transformation towards global sustainable welfare.

Keywords Green Finance, Sustainability, Socio-ecological Transforma-

tion, Strategies, Environmental Policies

“…[G]reen finance represents the global financial community’s first structured

attempt to join financial performances and positive environmental impact …”
(Berrou et al. 2019a: 4)

Introduction1

It is widely recognised that, besides economic output, the concept of

‘welfare’ encompasses many additional important dimensions, such as
environmental sustainability, job security and a more equal distribution

4
of income and wealth (Schultheiß et al. 2020, Novy et al. 2020). Debates
on de-growth, numerous movements against environmentally destruc-
tive projects, concerns about climate change and the loss of biodiversity,
and the recent rise of the Fridays-for-future movement, have shown the
rising concerns about environmental issues. Additionally, we have seen
the emergence of international trade union cooperation, e.g. the Trade
Unions Democratic Energy Network (2019), demanding a global demo-
cratic energy transition requiring public investment and public ownership
to overcome capitalist structures. However, the idea of sustainability had
already been rediscovered in the 1970s, and rapidly found its way into
mainstream discussions and policies. The original radical transforma-
tive perspective was abandoned in the 1980s and 1990s (Castro 2004). In
the meantime, sustainability has become a dominant discourse, a central
element of corporate social responsibility (CSR), and an important and
growing business field. Among industrial companies and non-financial
companies in general, it has become more common for them to represent
themselves as ‘green’ by using CSR reporting in order to increase profit-
ability. As Weber/ElAlfy (2019: 57) summarise:

“Corporations have realized that reporting on environmental and social issues

can help achieve long-term profitability through developing a positive corporate
image, which should satisfy stockholders’ interests.”

Green finance, as a central element of sustainable finance, has grown

quickly over the past years (IMF 2019, UNCTAD 2020). The rise of green
finance took place against the background of the financial crisis of 2008,
a crisis that led to decreasing financial returns and that had considerably
threatened the image of finance in the public perseption. Hence, it is no
surprise that green finance has become the new panacea for making capi-
talism more sustainable. The increasing importance of green finance has
contributed to a more positive image of finance, and is mirrored by the
global issuance of green bonds, which started in 2007 with around USD
1Bn globally, and surged to a value of USD 167bn in 2018 (Berrou et al.
2019a: 22). Compared to a total of USD 1.34tn of corporate bond issue in
2018 (Reuters 2018), it is an apparently significant and important develop-
ment. Besides green bonds, there are also other financial products such

5
as green asset-backed securities, green loans, green funds, green project
financing and green indices (Berrou et al 2019a). Alongside different
green financial products, green finance can also be analysed by looking at
different sectors or agents in the field of green finance. These agents include
banks and the financial sector, multilateral development banks, and non-
financial corporations. As an element of green finance, banks have started
to introduce criteria to assess the environmental and sustainability risks of
their borrowers, which helped to decrease their credit risk. This has been
followed by focussing on green investment opportunities by establishing
green mutual funds, green indices, such as the Dow Jones Sustainability
index, and other investment vehicles (Weber / ElAlfy 2019).
Different institutions provide different definitions for green finance.
In general, green finance tends to be defined according to the underlying
motivations. Green finance is often referred to as “financial stocks and
flows aimed at supporting the achievements of the environment-related
SDG.” (Berrou et al. 2019: 13). Moreover, green finance is part of sustain-
able finance, which also encompasses social issues, while climate finance is
considered an element of green finance (UNEP 2016, Berrou et al. 2019b:
34). It is generally assumed that environmental issues can be fixed within
the current economic capitalist order. Often, reference to the UN Sustain-
able Development Goals (SDG) is made (Rezende de Carvalho Ferreira
et al. 2016). However, it has to be noted that the SDG, although widely
accepted or even hegemonic, are also criticised, because they explicitly,
and contrary to the Millennium Development Goals (MDGs), privilege
economic interests over universal entitlements. In so doing and by not
questioning the current development paradigm, the SDG tend to under-
mine social struggles for more socially just and ecologically sustainable
strategies (Weber H. 2017). In addition, it is claimed that the SDG are
based on the assumption that decoupling is possible, which is consid-
ered a myth (Fletcher/Rammelt 2017), and SDG are considered as prior-
itising economic growth over sustainable resources use (Eisenmenger et al.
2020). Moreover, when dealing with SDG, international financial insti-
tutions such as the International Monetary Fund (IMF) are often crit-
icised for not adequately addressing social inequalities (Donald 2019).
In line with this, instead of assuming a compatibility between capitalist
growth, a healthy environment, and social goals, critical political economy
perspectives argue that capitalist dynamics tend to be in contradiction

6 Johannes Jäger, Lukas Schmidt

with nature. In this perspective, the opportunities to fix global environ-
mental problems are very limited, due to the expansionist dynamics of
capitalism and its internal power structures. Therefore, it is argued that an
incorporation of environmental issues under a capitalist framework is not
a sufficient strategy for sustainability. Instead, the economic system has
to be changed (Liodakis 2016; Zeller 2020), i.e. that a fundamental socio-
ecological transformation has to take place.
This special issue analyses the implications of finance on the environ-
ment and seeks to address the question of which form of finance contrib-
utes to a socio-ecological transformation. Therefore, we consider a socio-
ecological transformation to be a process needed to change the global
capitalist mode of production in such a way that it is globally sustain-
able (avoiding climate change, the destruction of the biosphere etc.) and
ensures globally equitable material living conditions for all. The role of
green finance is thereby considered within the broader framework of global
financial structures and developments. The recent Covid-19 pandemic
has shown the importance of states and governments in combating the
pandemic. In the current conjuncture, AK Wien Abteilung EU & Inter-
nationales (2020) holds that it is necessary, not just to save banks and
multinational corporations, but the people and the climate. The climate
crisis and the multiple ecological crises the planet faces are expected to
have much more disastrous effects than the Covid-19 crisis. Combating the
global environmental crisis requires vigorous public action. Similar to the
Covid-19 crisis, environmental issues and policies affect different groups all
over the globe in very different ways. Against this background, it is essen-
tial to discuss the limits and the implications of current financial struc-
tures and green finance in a global perspective, and also with reference to
different groups in society.
This introduction starts with a short overview of environmental prob-
lems and their uneven nature on a global level in today’s capitalism. The
overview is followed by a critical assessment of the dominant perspectives
on the role of green finance and proposes a typology to distinguish neolib-
eral, reformist and progressive transformative forms of green finance.
The subsequent section demonstrates how the papers in this special issue
are related, and which insights into socio-ecological transformation and
the role of finance therein they offer. Finally, we present conclusions for
progressive strategies and policies.

Global Green Finance and Sustainability: Insights for Progressive Strategies 7

 2. The highly unequal overuse of the global environment by the
global North

Global capitalism leads to an overuse of natural resources (Fischer-

Kowalski/Pallua 2016). This overuse carries with it significant environ-
mental damage, and is not sustainable. Global warming is one of the most
dramatic consequences. To keep global warming to +1.5 degrees centigrade
by 2030, it is necessary to reduce global CO2 emissions by 7.6 per cent
per year from 2020 to 2030 (UNEP 2019a: 26). This is extremely unlikely
to happen under current capitalist structures and the prevailing capi-
talist mode of production. Moreover, the access and use of environmental
resources is highly unequal: the poorest 50 per cent of the global popu-
lation account for only about 10 per cent of global emissions, while the
richest 10 per cent account for about 50 per cent. It is mainly rich people
in the global North (Kleinhückelkoten/Neitzke 2016), but also rich people
in the global South who cause these emissions. Oxfam (2015) estimates
that the richest 1 per cent is responsible for about 30 times more emissions
than the poorest 50 per cent of the world population. Industrialised coun-
tries use much more natural resources per capita compared to the usage
of developing countries (Ritchie/Roser 2020). One characteristic of this
uneven consumption of natural resources is that the global South is a net
exporter of natural resources to the global North (Fischer-Kowalski/Pallua
2016). However, economic development goes hand-in-hand with higher
use of resources and increased emissions, as shown very clearly in the case
of China. Its global share of natural resource consumption increased from
7 per cent to 34 per cent between 1950 and 2010 (Fischer-Kowalski/Pallua
2016: 72). In the 2000s, China became the biggest emitter of greenhouse
gases after the USA. Outsourcing ‘dirty’ production allowed the USA and
the EU to reduce their own carbon footprints in domestic production.
However, if the carbon incorporated into trade with China is considered,
the footprint of the USA and the EU is substantially higher (UNEP 2019b
see figure 1, Bergmann 2013). However, the role of China in the reduc-
tion of global CO2 emissions is crucial (Pan et al. 2017). Compared to
China, India’s emissions per capita are less than one third (see figure 1). If
India and other countries from the global South further develop economi-
cally, they would require more natural resources. Given the limits of the

8 Johannes Jäger, Lukas Schmidt

planet, however, expanding the prevailing current mode of production and
consumption in rich countries to the rest of the world would simply not
be possible. Today`s highly unequal overuse of natural resources globally,
but also within the EU (Ivanova/Wood 2020), and the use of developing
countries as a global sink for waste (Laser/Schlitz 2019), are not a coinci-
dence but an outcome of the specific configuration of contemporary asym-
metrically structured global capitalism. In addition, the effects of climate
change are unequally distributed among various socio-economic groups.
For example, women in rural parts of developing countries are very vulner-
able, as they typically rely heavily on climate-sensitive processes for their
livelihoods (Oxfam 2015). Poor people are more exposed to natural disas-
ters and less protected against the consequences of these catastrophes than
is the wealthier part of society (Hallegatte et al. 2016).
Europe’s and the US’ relative overuse of global resources and their
contribution to global environmental problems are disproportionally high.
This is neither sustainable nor desirable from the point of view of the large
majority of the world population. The question arises, thus, whether, to
what extent, and which type of green finance can contribute to a necessary
socio-ecological transformation that takes this international dimension of
sustainability into account.

Figure 1: CO2 emissions, 1992–2017

Source : UNEP 2019b

Global Green Finance and Sustainability: Insights for Progressive Strategies 9

 3. Dominant discourses and different types of green finance

Although the IMF (2019) does not find any evidence that sustainable
or green investment provides higher risk adjusted returns, it is frequently
argued that in general green finance following sustainability criteria is
not just beneficial to the environment but also supposed to lead to higher
profits for financial investors. Transnational capitalist leaders, their organic
intellectuals, and representatives of private finance do not rest when it
comes to promoting sustainability and calls for action against climate
change. Larry Fink (2020), CEO of the world’s largest financial investment
company, in his well-known letter to investors is a perfect example of this
phenomenon. In public discourses, it tends to be such views that domi-
nate the framing of problems, while working class perspectives are not
considered. These dominant discourses spread optimism regarding how
capitalism and private finance can contribute to solve the environmental
crises and the problem of climate change. We argue that besides these
dominant discourses, other types of green finance also exist (for an over-
view see table 1). Although much less visible, they offer important entry
points for progressive policies.

3.1. Neoliberal green finance

The promoted solutions within the dominant discourse on green
finance and green capitalism tend to be in line with mainstream neoclas-
sical environmental economics (Anderson 2019). We propose to clas-
sify this perspective on green finance, that is in line with neoclassical
economic perspectives, as neoliberal green finance. These discourses tend to
obscure the implications of environmental issues and policies on different
economic and social groups in (global) society. Neoclassical perspectives
hold that moral sanctions and codes, for example in the form of corporate
social responsibility (CSR) or following ESG (Environmental, Social and
Governance) criteria, can contribute to solving environmental problems.
While the positive environmental effects of voluntary ESG measures tend
to be at best quite limited (IMF 2019), they allow companies to promote
themselves as environmentally friendly and to differentiate their products
as sustainable. Thereby, they feign to avoid more drastic direct government
regulation by pointing to their activities, implicitly arguing that there is no
need for stricter regulation. This is a common way of justifying the benefits

10 Johannes Jäger, Lukas Schmidt

 Types of Elements of Forms of Implications
green finance (green) finance regulation
No or very limited
positive environ-
Voluntary standards mental effects legiti-
Private green finance
(CSR, ESG) mising finance, oppo-
sing general binding
environmental rules
Private green finance Subsidies, including Transfer of public
Neoliberal
supported by public public risk taking finance to private
green finance money (guarantees) (finance)
Commodifica-
Market-making,
Private green finance tion, expropriation
transparent non-
supported by neoli- of public natural
binding standards,
beral public regula- resources, contribu-
supporting dispos-
tions and policies ting to further financi-
session
alisation
Raising public finan-
Reformist strategy to
cial sources (taxes)
Reformist public support productivist
causing positive envi-
green finance green capitalism and
ronmental and social
beyond
impact
Binding regulations
for the financial sector
Reformist (forbidding certain
green finance Reformist public
financing activities,
Putting public and
enforcing others),
command and control private finance at the
restricting harmful
policies in finance service of productive
cross-border capital
(and beyond) green development
flows to allow for
reformist domestic
monetary and finan-
cial polices
Providing resources
Progressive public Binding regulations
beyond green capita-
command and control for economic activi-
lism towards socio-
policies aiming at ties (national, inter-
ecological trans-
global environmental national, north-south
Progressive formation (global
rights and caps context)
transformative sustainable welfare)
green finance Public financial
Decommodification,
resources for public
Transformative public socio-ecological trans-
provision (national,
green finance formation (global
international, north-
sustainable welfare)
south context)

Table 1: Types and elements of green finance, forms of regulation and implications
Source: own compilation

Global Green Finance and Sustainability: Insights for Progressive Strategies 11

of private green finance (Rezende de Carvalho Ferreira et al. 2016). Weber/
ElAly (2019: 69) point to the problem that “[so] far, sustainability reporting
rather focused on positive impacts without being transparent about nega-
tive impacts.” Moreover, the problem remains that voluntary codes of
conduct tend to be followed only and exclusively if they do not reduce but
rather increase profitability. A series of voluntary codes of conduct has also
emerged in the financial sector, representing an important cornerstone of
what we call neoliberal green finance. Weber/ElAlfy (2019: 72f.) conclude:

“Hence, financial materiality seems to be the main driver for green finance so far.
Though we see an increase in green finance, we also have to conclude that green
finance is far from being in the core of the business for most MDB [Multilateral
Development Banks], industrial companies, and banks. For most of them green
finance is a niche product and service compared to their conventional business.
[…] If we look on reporting, one might get the impression that green finance
plays a major role in MDB, companies and banks. This, however, is less a matter
of the ratio of green finance compared to other businesses, but it is because of
the way of reporting. Most of the reporting is still to paint a positive picture to
stakeholders and shareholders. It is used less as a strategic management tool, but
as a tool to increase the reputation of firms. Furthermore, many of the reporting
standards focus on what is profitable for the company and not for the environ-
ment. It is less about the impact of green finance on the environment, but rather
the impact of green finance on the company itself. This supports green finance
only as far as it has a direct positive impact on the business or as long as it has a
positive impact on the reputation.”

The Coase theorem, in the tradition of neoclassical theory, argues

that well-established private property rights, together with low transaction
costs, represent an efficient solution to environmental problems, which
are seen as market failures (Harris and Roach 2013). Tradeable pollution
permits, such as the CO2 trading scheme establishing indirect property
rights, can be seen as an example of this argument being put into prac-
tice. The financial sector provides financial services and products in the
context of the carbon markets created under the Kyoto Protocol mecha-
nism. Establishing property rights on nature, making nature tradable, and
implementing financial and regulatory government policies supporting
desired (environmentally friendly) behaviour creates new markets and,

12 Johannes Jäger, Lukas Schmidt

hence, possibilities for extracting profit. The increasing importance of
neoliberal green finance can be understood as an element of a broader
long-term process of finance becoming more important in the economy,
a phenomenon frequently referred to as financialisation (Lapavitsas 2013).
In this regard, neoliberal green finance contributes to a further commod-
ification/marketisation of nature by deepening capitalist relations of
production and capitalist dynamics, and by contributing to financialisa-
tion (Brunnengräber 2009). Against this background, Brand and Wissen
(2014) argue that the financialisation of nature represents a strategy to deal
with capitalist crisis tendencies. Moreover, when commodifying nature,
one assumes commensurability, i.e. the notion that one form of nature
can be compared to and substituted by another (Bracking 2020). Hence,
expanding neoliberal green finance does not contribute to solving environ-
mental problems, but on the contrary, deepens them.
The practical implication of the preferred neoclassical option can be
illustrated in the case of Covid-19: instead of generally forcing people to
stay at home, permits to go out could have been issued. The permits could
then be sold and traded. Those who really wanted to go out (and can afford
it) would do so. From a societal point of view, this means that the wealthy
can avoid being locked down and the costs of adaptation are shifted onto
the poor. In a global perspective, this neoclassical view implies that envi-
ronmental costs (in form of pollution or waste) should be relocated to
poorer countries, because it considers this an efficient solution, as people in
these countries are less willing (and able) to pay for environmental protec-
tion (Johnson et al. 2007). Hence, this neoclassical perspective helps to
legitimise the shifting of environmental costs to poorer countries and
people, while providing profit opportunities.
Typically, a neoclassical perspective assumes that environmental
problems are caused by externalities. By including so-called external
costs, markets will send the correct signals and environmental problems
can be solved (Harries and Roach 2013). Including externalities via subsi-
dies or shifting private risks to public institutions, e.g. via guarantees, is
attractive from the point of view of green financial capital because these
measures increase profitability for private investors. This, however, implies
that private financial capital is supported by state subsidies and public
money, i.e. by taxpayers. Hence, it represents an element of neoliberal
green finance.

Global Green Finance and Sustainability: Insights for Progressive Strategies 13

 3.2. Reformist green finance
Dominant neoliberal discourses on green finance suggest that, in
order to implement a very costly ecological transformation, it is necessary
to mobilise private financial resources. Lagoarde-Segot (2020: 2), however,
holds that:

“… the SDG financing gap is primarily the result of an optical illusion created
by looking at sustainable finance through the prism of the loanable fund theory.
The biggest obstacle to financing the SDG may not be the scarcity of money, or
the unavailability of policy options, but, rather, our economic zeitgeist.”

The reason for this illusion is that the common assumption of a ‘lack
of finance’ is based on the loanable funds approach. As alternatives to this
approach, Lagoarde-Segot (2020) points to the roles that central banks
and endogenous/credit money could play in dealing with environmental
problems. There is no lack of finance. The necessary financial means can
be provided easily by appropriate monetary and public financial institu-
tional arrangements. Thereby, central banks and also (multilateral) devel-
opments banks are potentially important players. However, development
banks are criticised for being still much more important for financing
brown investment, and in so doing foil their environmental goals while
trying to be recognised as ‘green’ (Weber/ElAlfy 2019). Such public struc-
tures of finance, from central banks to public development banks, repre-
sent an important element of reformist green finance. There is, thus, no lack
of finance, but public money should be used for preferably public poli-
cies yet not subsidise directly or indirectly finance and industry, thereby
inflating profits.
Environmental taxes, although also part of the neoclassical toolkit,
are, however, less attractive to private investors than public funding, as
they restrict certain behaviour and markets and may reduce profits. From a
neoclassical perspective, they are still preferred over command and control
policies that simply enforce companies or people to fulfil certain envi-
ronmental rules and/or forbid certain environmentally damaging behav-
iour. Nevertheless, these command and control policies, important tools
according to political ecology, have been effective in dealing with envi-
ronmental problems. Examples of such policies include forbidding the use

14 Johannes Jäger, Lukas Schmidt

of toxic substances, forcing industries to use certain filter technology, etc.
Command and control policies are not the preferred solution in a liberal
perspective as they restrict the freedom of individuals; also, indiscrimi-
nately, that of the wealthier ones. In order for private green finance to
deliver desired environmental effects, an adequate regulatory framework
and binding environmental rules are necessary (Wang and Zhi 2016).
In this regard, we propose subsuming taxes and binding environmental
rules and financial regulation that indeed provides environmentally (and
socially) desirable outcomes under the header of reformist green finance.
There have been several initiatives to develop stricter rules. While the
EU High Level Expert Group in Sustainable Finance (2018) provides some
modest suggestions to increase transparency, China has developed a much
stricter framework. A green credit policy requires investors in China to allo-
cate investment towards green industries and to withdraw from industries
with a negative impact on the environment. In addition, environmental
indicators are considered in banking supervision and risk assessment
(Weber 2017). Also, the IMF (2019) insists on the importance of the regu-
latory context for private finance. However, not necessary all types of regu-
lation can be considered as being elements of reformist finance. Introducing
standards or standardised labels for what is considered green finance may
not address general flaws of neoliberal green finance, but instead legitimise
certain practices without tackling environmental problems. While institu-
tions such as the European Commission (2019) tend to favour neoliberal
green finance, UNCTAD (2019) emphasises the role of state finance and
public provision (Gallagher/Kozul-Wright 2020). UNCTAD (2019) more-
over, is sceptical about the beneficial effects of neoliberal (green) private
finance and cross-border financial capital flows and proposes limiting the
negative effects of it and relying on domestic public green finance instead.
Measures proposed by UNCTAD (2019), hence, represent, to a large
degree, central elements of reformist green finance.

3.3. Progressive transformative green finance

Progressive transformative green finance goes beyond a Polanyian
critique demanding a re-embedding of finance in order to be able to address
ecological needs (Lagoarde-Segot/Paranque 2018); it also aims to replace
the capitalist mode of production by expanding de-commodified forms of

Global Green Finance and Sustainability: Insights for Progressive Strategies 15

provision and democratic and rational forms of production. De-commod-
ification of the economy and social planning, instead of capitalist accu-
mulation strategies, become the guiding principles. Such a socio-ecolog-
ical transformation should reduce the amount of surplus value extracted
and assure a sustainable way of production that does not undermine the
working and living conditions of others (namely people in other parts of
the world, future generations). Reducing the use of nature and assuring an
equal access to globally sustainable welfare as an attractive form of produc-
tion and living are at the centre of this strategy. It is based on international
solidarity and democratic well-being, including maximum individual caps
for the use of the environment, guaranteeing for everybody today and for
future generations decent living and working conditions, referred to as
sustainable welfare (Koch/Buch-Hansen 2020). Based on solidarity, inter-
national cooperation should ensure that natural resources are used in a
rational way and that everybody has the right to have access to a minimum
amount of natural resources (e.g. in the form of food, energy etc.). While
in the core countries this will imply de-growth in certain areas (but growth
in others), in peripheral countries, the preservation of pre-capitalist subsist-
ence-based modes of production and the development of new, less inva-
sive and less resource-intensive forms of production can be important
cornerstones of such a strategy. This, however, implies a different form
of national and international regulation and a radically different role of
finance therein. Cross-border financial flows have to be strictly regulated
and national and domestic financial services are to be provided as a public
good and guided by democratic decision making. Progressive transforma-
tive green finance relies on democratically planned public finance financed
via central banks and development banks, it taxes capital and the wealthy
to generate financial means, and seeks to break with the power of capital
while supporting a transformation towards post-capitalist societies.

4. Contributions to this special issue

The dominant neoliberal discourses and forms of green finance turn

out to be highly problematic in environmental terms, provide legitimacy
to finance and its agents, and, hence, are not part of the solution but rather
part of the problem. From a critical progressive perspective, a more radical

16 Johannes Jäger, Lukas Schmidt

rupture is required in order to adequately address environmental prob-
lems. Alternative strategies imply a different role of finance and require
state intervention and regulations that forbid or demand certain behaviour
and technologies. Against the background of a critical political economy
perspective, it is not a technical question of implementing binding rules,
but an issue of social and political power relations that are decisive. These
power relations and social and political struggles will determine the config-
uration and role of finance and its environmental and social implications.
The contributions in this special issue shed light on specific aspects of green
finance, show problematic tendencies, processes and structures and also
provide insights towards alternatives.
This special issue starts with an overview, by Johannes Jäger and Lukas
Schmidt, of the role of green finance within the context of global finan-
cial structures. Adopting a critical political economy perspective, they
provide a theoretical framework for analysing the environmental impact
of global capitalism and the role of finance by focussing on global asym-
metries and dependencies. They adapt regulation theory in order to analyse
how different development models are related and how different forms
of (green) finance fit into specific national development models. Thereby,
they distinguish between neoliberal green financial strategies supporting
the status quo and related financialised patterns of accumulation, reformist
green finance contributing to green capitalism, and finally, progressive trans-
formative green finance. It is only the latter that could possibly break, they
claim, with the disastrous environmental impact of expansionary capi-
talism and contribute to a fundamental socio-ecological transformation.
Such a transformation would avoid the overuse of natural resources by a
few and would be consistent with achieving globally viable sustainable
welfare.
In his contribution, Samuel Decker analyses the transformative poten-
tial of Green Deal concepts. Against the background of the need for a
socio-economic transformation, he develops a theoretical framework that
systematically allows for the analysis of the transformative potential of
different strategies. Therefore, he focuses on the impact on redistribution,
socialisation and the role of planning in different Green Deal concepts and
assesses the “Ecosocialist Green New Deal” proposed by the Democratic
Socialists of America, the “Green New Deal for Europe” of the Democ-
racy in Europe Movement (DiEM), and UNCTAD’s “Financing a Global

Global Green Finance and Sustainability: Insights for Progressive Strategies 17

Green New Deal” and their potential for a socio-ecological transforma-
tion. While the “Ecosocialist Green New Deal” proves to be the most
progressive proposal, the DiEM and UNCTAD approaches also include
some initial versions of planning in the form of central banksupported
green investment. This is very different to the European Commission’s
Green Deal proposal, which makes no mention of any specific policy meas-
ures in any of the areas of redistribution, socialisation and planning.
Elisabeth Springler, in her contribution, focusses on macroeco-
nomic stability and financial innovation in the context of green finance
and sustainability. She shows how green finance emerged because of the
developments of the 2008 crisis and how neoliberal market forces were
promoted. Risk is privatised and financial fragility increases because of
securitisation and other novel financial techniques. However, against the
background of a heterodox economic perspective, a distinction between
a neoliberal use of financial innovation and its institutional use is made.
She concludes that a strong institutional embeddedness of green finance is
required in order to ensure macroeconomic stability. In addition, a strong
state is desirable to enable coordination between different agents in the
economy, thereby contributing to sustainability.
These rather theoretical and general perspectives are followed by a
series of selected case studies. The first of these concerns China. Bern-
hard Tröster and Karin Küblböck analyse the impact of China’s financial
strategy on natural resources in Latin America and Sub-Saharan Africa.
This is highly relevant as China has started to behave, in certain aspects, in
much the same way as a core country of the world economy. The country
uses multiple strategies to assure an inflow of natural resources in order
to meet its rising demand for resources. Thereby, finance in the form of
foreign direct investment and loans plays an important role. There is no
doubt that China pushes peripheral countries into a subordinated situ-
ation. Nevertheless, the authors argue that China attempts to increase
resource efficiency in peripheral countries. This could potentially trigger
policies to diversify the economy and contribute to productivist develop-
ment. However, this leaves the problem of the increasing and unequal
overuse of natural resources unresolved.

18 Johannes Jäger, Lukas Schmidt

 Simone Claar, in her contribution, analyses green finance and the role
of transnational classes in the area of investment in renewable energy. She
points to the theoretical gaps in international political economy literature
and proposes a global ecological political economy perspective building
on a critical tradition. Green economy and green finance are clearly identi-
fied as being part of free market approaches. For the case of South Africa,
she shows how green finance and green economy are related. It becomes
evident that transnational capitalist classes are key actors promoting
green investment in renewable energy. Thereby, she points to the conflicts
between different classes and their factions at the national and interna-
tional levels, and asks whether we can already speak of a new green trans-
nationalist capitalist class faction.
In their contribution, Susanne Soederberg and Lama Tawakkol
analyse, from a global political economy perspective, the humanitarian-
development nexus that frames refugee situations as development oppor-
tunities. In the case of the Jordan compact, and the development financing
that has derived from it, they show how the global capitalist power struc-
tures and paradoxes that go along with neoliberal practices advance global
(financial) capitalist class interests. They focus in particular on the role of
water as a key resource. They conclude that the Jordan compact turns the
Syrian crisis into an opportunity for global development finance and its
institutions that supports private finance rather than refugees or commu-
nities. With their case study, they clearly show how, under the conditions
of finance-driven development strategies, development activities often
provide more benefit to the developer and creditor than to the targeted
group.
Finally, Yuliya Yurchenko analyses Europe’s energy sector, a sector that
is crucial due to its impact on climate change. Building on a critical polit-
ical economy perspective, she analyses the EU’s strategies for emissions
reduction and the implications of the liberalisation of the energy market,
including the potential outcomes of the Green Deal proposals. These meas-
ures have not delivered the desired outcome but have led to monopolisa-
tion and energy poverty. She concludes that a radically different approach,
namely energy democracy, is needed for a socio-ecological transformation

Global Green Finance and Sustainability: Insights for Progressive Strategies 19

in Europe. This means that universal access, stability and security of supply
should be guaranteed, while renewable energy capacity has to be developed
quickly and in an organised manner under public and democratic control.
This, however, could be jeopardised by the existence of the Energy Charter
Treaty and the treaties in the making such as CETA, TiSA and TTTIP
that would curtail states’ powers.

5. Implications for progressive strategies and policies

Common approaches and dominant discourses of green finance tend

to be justified by neoclassical environmental economics and by finan-
cial institutions and their allies. Based on the brief assessment outlined
in the introduction, the proposed typology and the contributions in this
special issue, it can be concluded that the prevailing form of global finance
and the green financial strategies that we call neoliberal green finance are
highly problematic, not just in social terms but also for the global envi-
ronment. Neoliberal green finance relies very much on voluntary standards
under the heading of corporate social responsibility (CSR) and environ-
mental and social goals (ESG). Green washing, social washing and cherry
picking are common practices. Meanwhile, these practices have started to
be considered problematic, even in mainstream financial media (Marsh
2020). Moreover, voluntary measures are often employed to argue explic-
itly and implicitly against the necessity of implementing binding rules.
Standards, such as many of those discussed today, tend to increase the
legitimacy of green finance, have a market-making impact, and are there-
fore more likely to strengthen and support financial capital than effec-
tively contribute to solve environmental problems. Such regulations repre-
sent an essential element of neoliberal green finance. In general, neoliberal
green finance contributes to further financialisation, increases global social
inequalities, and shifts the burden of environmental damage and costs
disproportionally to the working class in both the global South and the
global North. From a progressive perspective, alternative forms of finance
and binding rules are effective in environmental terms and socially desir-
able, and hence, a socio-ecological transition is required. While reformist
green finance potentially contains certain forms of financialisation and, at
least in part, contributes to productive green growth in some countries, this

20 Johannes Jäger, Lukas Schmidt

form of green growth is not expected to end the highly unequal overuse of
natural resources and the related global environmental problems. Alterna-
tively, a progressive transformative green finance based on public finance and
public provision is more likely to lead to a socio-ecological transformation
that will end the overuse of global environmental resources, and promotes
a more equal global use of natural resources based on environmental caps
and rights under the title of sustainable welfare.
What to do?
From a progressive perspective, representing the interests of the
majority of the working class and the disposed and marginalised groups in
the global South, as well as in the global North, a combination of strategies
is important. In general terms we distinguish three strategic entry points
that are not mutually exclusive but are interlinked and can and should
therefore be combined.
Firstly, a central strategy should be a defensive one, combating further
financialisation entering through the backdoor of neoliberal green finance.
This is necessary in order to prevent not only financialisation in the core
countries but also a deepening exploitation of peripheral countries via
financial means. These defensive strategies should avoid falling into the
trap of false promises of neoliberal green finance, but rather understand
them as constituting a Trojan horse. Although green finance might appear
an attractive gift of finance, it brings with it a bias towards private solu-
tions instead of binding public environmental rules, the latter being crucial
for a substantial socio-ecological transformation. Moreover, it enhances
the possibilities for financial capital to extract surplus value and supports
neoliberal forms of uneven and imperialist global capitalism.
More recently, political initiatives such as the important Sustainable
Finance Beirat der Bundesregierung (2020) in Germany has been arguing
in favour of transparent standards and binding regulations in its prelimi-
nary report. However, it proposes a regulatory framework that intends to
reach environmental goals and simultaneously to increase the competitive-
ness of German finance. As the Chairperson of the Sustainable Finance
Committee, Karsten Löffler (2020), prominently states on the webpage:

“With the establishment of the Sustainable Finance Committee, the German

government is putting the financing of climate and sustainability goals on the
agenda. In doing so, it is highlighting their importance for the entire economy

Global Green Finance and Sustainability: Insights for Progressive Strategies 21

 and thus for the future-proofing and international competitiveness of Germany
as a financial centre.“

The position of the institution is not surprising, given that a huge

majority of its members are representatives from the financial industry. It
is very likely that future proposals will be in line with these preliminary
suggestions and finally address mainly the needs of the financial sector and
industry and to promote finance in Germany. Although this might include
elements of reformist green finance, it is more likely to contribute, in the
main part, to neoliberal green finance.
Progressive strategies should not subsidise but push back and contain
private forms of neoliberal green finance at the local, national, macro-
regional and international level. Specific measures at a national level range
from ending tax privileges for private finance and avoiding any kind of
subsidies for finance, to strict regulation, the closing of environmental
markets, and resisting further commodification and financialisation of
nature. Instead, de-commodification and a public democratic management
of finance and the commons should be introduced. At the international
level, international agreements of any form should increase, not reduce, the
financial autonomy of peripheral states and avoid all types of dependen-
cies. Internationally active public institutions in the global North, such as
development banks, should not support the expansion of private financial
capital to the global South, as this is expected to cause financial instability
and increase financial dependency, encourage further extraction of finan-
cial and natural resources, and deepen environmental and social problems.
At the EU level this means analysing critical current policy issues
(EU High Level Expert Group in Sustainable Finance 2018, European
Commission 2019) etc. by disclosing the neoliberal tendencies within
these, opposing them and providing political alternatives.
Secondly, priority should be given to strict financial and environmental
rules as central elements of reformist green finance. This can be a first step
toward reforming capitalism and making it greener and potentially more
equal. In a global perspective this is not sufficient to address environmental
problems and the highly uneven use of global natural resources. However,
reformist green finance can be a first step towards radical reformism. This
strategy does not only include measures against financialisation but should

22 Johannes Jäger, Lukas Schmidt

also support finance as a means for productive and more egalitarian ways
of organising the economy. Reformist green finance should, therefore, rely
mainly on public finance based on taxing financial and capital income,
on wealth taxes and through a monetary policy that accommodates and
directly finances desired forms of public investment by means of binding
lending targets for banks, and through the use of public banks with envi-
ronmental and social goals etc. This is to ensure that the public interest
reigns over capitalist interests regarding how the environment is used, and
that public financial resources are not appropriated by private financial
capital but rather belong to the public and are used for public purposes.
At the EU level, expanding the public sector and using European
institutions such as the ECB and its structures to finance a socio-ecolog-
ical transformation are essential actions. In the EU, this would require
opposing all strategies of a Green Deal that do not lead to a productive
transformation of the economy and a substantial reduction of the use of
resources. Instead, what should be proposed is to strengthen public finan-
cial instruments and implement binding environmental rules for finance
(and other economic sectors) in general, such as imposing lending targets
for banks and other binding measures for the whole sector. In addition,
it is important to deal with the inequalities within Europe (EuroMemo
Group 2020). Similar strategies may also be adopted by the global South.
Beyond the role of central banks, Oscar Reyes (2020) presents a series of
further measures, such as the building of green development banks and
the implementation of binding rules that force institutional investors and
public pension funds to change their investment policies in the direction of
sustainable criteria. Christian Zeller (2020) proposes going beyond this, by
strengthening public social policy and pension systems in the tradition of
pay-as-you go public schemes instead of policies based on financial markets.
It is essential that the policy autonomy of countries is not restricted by
European rules, international trade and investment agreements or similar
treaties. Regarding finance, Europe should support progressive strategies
put forward by UNCTAD (2019) that aim at increasing autonomy and
repressing international (financial) capital, while making the periphery less
dependent and less vulnerable to international (European) capital flows
(Gallagher/Kozul-Wright 2020). This includes combatting tax evasion by
the wealthy within the EU and its (related) tax havens. In addition, it is

Global Green Finance and Sustainability: Insights for Progressive Strategies 23

necessary to put limits on EU multinationals in the South and on Southern
multinationals in the EU that extract wealth and destroy the environment.
Reformist finance in an international Nord-South context should consist
of grants but not (soft) loans, nor should a form of neoliberal condition-
ality be imposed that facilitates access of capital, i.e. also green financial
capital, from the global North. Moreover, it is necessary to ensure that the
public money benefits the working class but does not inflate private finan-
cial profits. Instead of supporting green capitalism in the periphery, which
often goes along with the destruction of the environment and the expul-
sion of people from their lands and traditional means of production, the
EU should contribute to sustainable welfare and production.
The downside of reformist green finance that is oriented toward produc-
tive green capitalism remains, however; the strategy of green productive
growth is likely to lead to further overuse of nature because of interna-
tional capitalist competition and the resulting competition for scarce
natural resources. However, reducing dependence on foreign resources (or
on externalising environmental damage to others) by supporting local and
national autonomous self-reliant ecological productive strategies might be a
potentially progressive strategy towards more radically reformist processes.
Reformist green finance could play an important role in that.
Thirdly, progressive transformative green finance based on public provi-
sion and de-commodification is needed to support a socio-ecological trans-
formation based on international cooperation that promotes development
models that go along with an equal and rational global (per capita) use
of natural resources. This strategy alone is expected to achieve a sustain-
able and egalitarian use of global natural resources. The driving forces for
such a socio-ecological transformation can only be the subaltern and wage-
dependent classes, and an orientation towards international solidarity.
Multilateral cooperation based on international solidarity is an essential
precondition. Productive and financial capitalists, together with the labour
aristocracy, are likely to oppose such an approach. An international regime
and agreements that support a transformation towards sustainable welfare
must be based on institutions that allow for a globally rational and equi-
table use of resources, and that introduce maximum caps for the individual
use of resources (Koch/Buch-Hansen 2020), and that also confer indi-
vidual environmental rights to natural resources, such as good quality food

24 Johannes Jäger, Lukas Schmidt

etc. The social and political basis of this would be ecologically and inter-
nationally oriented working class and solidarity movements. Undoubtedly,
it is important what happens in large globally relevant societies such as
China, and also in Europe. Different national hegemonies in these coun-
tries (regions) could support a different international mode of foreign rela-
tions and an alternative global hegemony and so reinforce progressive
domestic movements and developments. While progressive transformative
green finance and a global social ecological transformation are certainly far
from being achievable in the current political conjuncture, these should
remain a central point of reference and a goal in progressive discourses
and strategies.
How to get there?
To begin with, it is important not to fall into the trap of the domi-
nant neoliberal discourses on green finance promoted by financial capital’s
organic intellectuals and its institutional allies. These discourses are, rather,
merely a strategy to further support and legitimise finance at the cost of
workers (and even productive capital). Today`s environmental problems
are a consequence of capitalist development models in global capitalism
and the class relations they are based on. Strategies to combat environ-
mental problems must, therefore, be based on working class solidarity (in
particular with marginalised and less privileged groups at the national and
international level) and aim at changing the class relations, and hence, the
mode of production. The disfavoured and exploited groups in the global
South have a vital interest in preserving the environment. However, it are
these groups that less natural resources use and that tend to be most nega-
tively affected by environmental problems and the global ecological crisis.
It is necessary to break with the power of finance (and capital) in
general, in order to support workers and democratic autonomy at the
national level, and to ensure solidarity at the international level. This means
not leaving the political debate about sustainability and green finance to
financial capital and its allies, but rather to strengthen the capacity of trade
unions, workers associations, and progressive NGOs (those that do not
ride the wave of neoliberal green finance) and activists to actively partici-
pate in these discourses and intervene in them. Alongside building inter-
national solidarity coalitions, it is necessary to take action and politically
influence national, European and international institutions and agree-

Global Green Finance and Sustainability: Insights for Progressive Strategies 25

ments, and contribute to a progressive new international multilateralism,
thereby opposing a further deepening of neoliberal regulations and prac-
tices at the cost of peripheral countries and workers. In so doing, it is
necessary to strengthen international progressive forces, not to buy into
dominant discourses promoted by (financial) capital but to rely on proper
theoretical concepts and assessments to promote solutions that represent a
socio-ecological transformation towards global sustainable welfare.

1 We are grateful to Arbeiterkammer Wien for funding the research for this special
issue. We wish to thank Oliver Prausmüller and Thomas Zotter for their highly
valuable support.

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Global Green Finance and Sustainability: Insights for Progressive Strategies 29

 Abstract Green Finance wird zunehmend als zentrales Element für
wirksame Lösungsstrategien bei globalen Umweltproblemen und gegen den
Klimawandel präsentiert. Nichts desto trotz tragen die gegenwärtigen Struk-
turen des globalen Finanzsystems dazu bei, dass globale Ungleichheiten repro-
duziert, die Übernutzung von Umweltressourcen vorangetrieben und damit
die globale ökologische Krise vertieft werden. Der Beitrag gibt einen Über-
blick zu den aktuellen Entwicklungen und der Rolle von Green Finance sowie
zu den Zugängen in der Schwerpunktausgabe zu Global Finance and Socio-
Ecological Transformation. Wir diskutieren die Auswirkungen von Green
Finance auf globaler Ebene und schlagen eine Typologisierung vor, die zwis-
chen neoliberalen, reformistischen und progressiv-transformativen Zugängen
zu Green Finance unterscheidet. Auf dieser Basis präsentieren wir Schluss-
folgerungen für progressive Strategien und politische Maßnahmen zur Finan-
zierung einer sozial-ökologischen Transformation in Richtung eines global
nachhaltigen Wohlstands.

Johannes Jäger
Fachhochschule des BFI Wien, Österreich
[email protected]

Lukas Schmidt
FIAN Österreich
[email protected]

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