Addressing societal challenges through alternative financial regulation. The case of climate change

Faruk Ülgen and Lyubov Klapkiv
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Lyubov Klapkiv: UMCS - Maria Curie-Sklodowska University

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Abstract: This article highlights three features of a capitalist economy that point to institutional changes in financial regulation necessary to address critical concerns such as climate change. The first feature is that the ultimate goal of capitalist dynamics is the accumulation of private wealth. This means that all other points that might be of interest at the societal level are considered as mere means to this end. Second, all economic activity requires financial support through the banking and financial system. The conditions under which activities are financed radically determine the possibility of wealth accumulation over a given period. Third, accumulation rather meets the requirements of individual efficiency than the goals of long-run societal viability. This obviously leads to incompatibility between public interest (macroeconomic stability and sustainability) and private interest (profit accumulation). An interesting expression of this opposition is the double materiality in the transition process: impacts of economic activity on the environment (environmental/social materiality), and impacts of the environment on economic activity (financial materiality). According to the risks and opportunities generated in such an interaction, the organization of capitalist accumulation becomes a matter of public good provisioning through the organization of financial markets. The production of a common good, i.e. environmentally and humanly sustainable organization of the economy, would then call for financial systems reframing according to the rules of preventive collective action. An alternative financial regulation that could shape the market behavior according to a set of sustainable ecotransition goals (ETGs) proves to be a relevant direction.

Keywords: Climate finance; double materiality; ecotransition; financial regulation; institutions (search for similar items in EconPapers)
Date: 2024-01-05
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Published in ASSA 2024 Annual Meeting, San Antonio, 5-7 janvier 2024, Allied social science associations; American economic association; Union for Radical Political Economics, Jan 2024, San Antonio, United States

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