Development Banks and the Green Transition

Despite the urgency of the environmental crisis, financial systems across the world continue to support activities that are inconsistent with the limits of a finite planet. The dominance of neoliberal and post-neoliberal ideas in combination with the political hegemony of the dirty private capital has prevented a green transformation of financial systems that would reallocate finance towards greener activities and would discipline dirty financiers. Drawing on the Keynes–Minsky tradition, this book provides an excellent analysis of what is wrong with the existing financial systems, both from an environmental and a social point of view. It advocates for a paradigm shift in the role of finance through the adoption of the principles of sustainable development convention. The book explains in detail how this paradigm shift can be achieved by establishing a new role for the state as the leading actor in the green transformation of industrial and macro-financial structures. The book covers a wide range of reforms that are necessary for a paradigm shift in finance. These include a renewed and expanded role for development banks, the use of new and existing central banking tools to support the green transition, and the adjustment of financial regulation in a way that would discourage dirty finance and would incentivise greener credit. A major strength of the analysis lies in its synthesis of historical perspectives with recent conceptual ideas in the critical macro-finance literature, enabling readers to grasp both the theoretical and practical underpinnings of these reforms. The book adopts a Global South lens, challenging “one-size-fits-all” approaches that typically characterise green finance initiatives. We cannot transform finance in a socially just way if we do not consider local institutional and socio-economic contexts, the differentiated development needs of countries, and the injustices that have been generated by colonial legacies and the global financial hierarchy. The book successfully explains why justice should be at the core of the green transformation of finance. The book is an essential read for anyone seeking alternatives to mainstream green finance narratives. It is also an important call for action and roadmap for policy-makers committed to building fairer and more sustainable economies. - Yannis Dafermos - Reader in Economics at SOAS University of London. His research interests lie in financial macroeconomics, climate finance, ecological macroeconomics, climate-aligned development, inequality and the political economy of the green transition.