How Finance and Firms Can Accelerate the Green Transition

Abstract

Access to bank credit and the quality of firms’ management both play important roles in determining how much businesses invest in energy efficiency and pollution reduction. While credit constraints can hinder firms’ ability to invest in capitalintensive clean technologies, such as machinery and vehicle upgrades, bad management practices often also pose a significant barrier. Firms with better green management practices – as measured by their environmental objectives, targets and monitoring systems – are more likely to invest in a wide range of green projects, from waste reduction and recycling to energy and water management. Based on a comprehensive survey of the recent literature, this article argues that policies aimed at facilitating access to green finance should be combined with initiatives to help business leaders become better green managers.