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.   Source: https://tradingeconomics.com/commodity/carbon Carbon pricing has become a cornerstone of environmental policies around the world. According to the latest World Bank tally , 110 carbon pricing instruments have been implemented, covering 53 countries, either through taxes or carbon markets. According to theory, carbon prices provide a clear price signal to the actors of the economy and informs them of the environmental cost of their pollution. They then have a clear incentive to reduce their emissions if they wish to reduce the associated bottom-line impact. The central question in this framework is to determine what the optimal carbon price should be. Pricing a commod...

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 relate...

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.   Sustainability Linked Loans (SLLs) have emerged as a dynamic financial instrument that aligns corporate financing with sustainability objectives ( source ). Unlike traditional loans, SLLs are tied to the borrower’s achievement of pre-determined sustainability performance targets (SPTs). As corporations increasingly prioritize ESG criteria, SLLs offer an opportunity to integrate these considerations into their financial strategies. This article explores the fundamentals of SLLs, their benefits, and the considerations necessary for maximizing their potential. What are Sustainability Linked Loans? SLLs are designed to incentivize borrowers to improve their environmental per...

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 total value of carbon markets across the world has reached €881bn in 2023 ($948.75 bn) an historical high that is dominated at 87% by the European Emissions Trading System (EU-ETS). To put this in perspective, this is roughly 5% of EU GDP. These values are increasing and other international carbon markets are gaining traction. With the commitments of the Paris Agreement, carbon economics are set to become a pivotal part of the global economy. This raises a number of questions about the way these markets operate and are embedded in our economies. In a series of articles we will be discussing the economic reasoning underlying carbon markets, the actual organisation of t...