A3 Book section, Chapters in research books
Financial system in steering the economy towards planetary well-being (2024)

Heimonen, K., Junttila, J., & Lehkonen, H. (2024). Financial system in steering the economy towards planetary well-being. In M. Elo, J. Hytönen, S. Karkulehto, T. Kortetmäki, J. S. Kotiaho, M. Puurtinen, & M. Salo (Eds.), Interdisciplinary Perspectives on Planetary Well-Being (pp. 216-230). Routledge. https://doi.org/10.4324/9781003334002-22

JYU authors or editors

Heimonen, Kari
Junttila, Juha-Pekka
Lehkonen, Heikki

Publication details

All authors or editors: Heimonen, Kari; Junttila, Juha; Lehkonen, Heikki

Parent publication: Interdisciplinary Perspectives on Planetary Well-Being

Parent publication editors: Elo, Merja; Hytönen, Jonne; Karkulehto, Sanna; Kortetmäki, Teea; Kotiaho, Janne S.; Puurtinen, Mikael; Salo, Miikka

ISBN: 978-1-032-36828-3

eISBN: 978-1-003-33400-2

Publication year: 2024

Publication date: 15/06/2023

Pages range: 216-230

Number of pages in the book: 270

Publisher: Routledge

Place of Publication: Abingdon

Publication country: United Kingdom

Publication language: English

DOI: https://doi.org/10.4324/9781003334002-22

Publication open access: Openly available

Publication channel open access: Open Access channel

Publication is parallel published (JYX): https://jyx.jyu.fi/handle/123456789/88236

Abstract

This chapter discusses the possible roles that financial system may play in steering economic production towards planetary well-being. The costs associated with using natural resources are seldom equal to the actual environmental costs incurred. The present chapter proposes linking Sir Partha Dasgupta’s Impact Equation and the standard asset pricing framework and discusses the roles that financial institutions and central banks as well as debt and equity funding play in supporting production that preserve planetary well-being via the incentives of those in need for and those willing to supply funding. It is proposed that the increasing costs of capital and the financial exclusion of non-environmentally friendly investments will tilt financial flows towards less harmful production, thereby promoting planetary well-being. The chapter highlights the important roles that the public sector and central bank activities play in addressing the incompatibility between economic development and planetary well-being through the financial intermediation system.

Keywords: international economics; economic systems; green transition; economic policy; economic control; central banks; financing systems