The Future of Environmental Finance

  Jean-Baptiste Vaujour is a Professor of Practice at emlyon business school where he teaches about consulting and green finance. He is an energy economist and a registered expert at the EU Commission and for the World Energy Council. He has recently published a book on the decarbonisation of the economy.   In this article, we explore the stakes around the emergence of a common language when stakeholders discuss green finance.   Based in economic theory, this requirement has been a constant request from market participants and a major regulatory achievement for the European Commission. Unfortunately, it is also only a prerequisite to actual environmental impact and even so, it already faces challenges and strong headwinds. Economic theory requires transparent information for efficient decisions Most of economic theory rests on the idea that market channel information to stakeholders in a transparent, immediate and free way. Investors can then decide on an efficient allocation o

Jean-Baptiste Vaujour is a Professor of Practice at emlyon business school where he teaches about consulting and green finance. He is an energy economist and a registered expert at the EU Commission and for the World Energy Council. He has recently published a book on the decarbonisation of the economy.   Exclusion lists have become an increasingly prominent tool for investment funds aiming to enhance their environmental performance. These lists, also known as negative screening , involve the deliberate exclusion of certain sectors, companies, or practices from an investment portfolio based on environmental, social, and governance (ESG) criteria. This method aligns investment strategies with ethical values and sustainability goals, addressing the growing demand for responsible investing. Advantages to creating exclusion lists Historically, investment funds have maintained exclusion lists based on so-called “sin stocks” such as those of companies operating in industries related to

Jean-Baptiste Vaujour is a Professor of Practice at emlyon business school where he teaches about consulting and green finance. He is an energy economist and a registered expert at the EU Commission and for the World Energy Council. He has recently published a book on the decarbonisation of the economy.   The Efficient Market Hypothesis (EMH) coined by Eugene Fama in 1970 posits that financial markets are highly efficient in reflecting all available information at any given time. According to this theory, it is impossible to consistently achieve returns that outperform the overall market through expert stock selection or market timing, because asset prices already incorporate and reflect all available information. This hypothesis forms the foundation of many investment strategies and financial models, predicated on the assumption that markets are rational and information is disseminated and acted upon swiftly and accurately. It is the touchstone on which all index investing stra