Abstract
Given the importance of financial capital for major socio-technical transitions, a better understanding of the financial system's role in transitions is overdue. Established transition frameworks appear well-suited to that end, but more research is needed to exploit their potential, particularly in the middle-range between specific case studies of individual financing challenges and broad analyses of the financial system as a whole. Enhancing the representation of finance can also bridge sustainability transition research with the fast-growing scholarship on sustainable finance, showing pathways how to overcome hurdles that the financial system poses for socio-technical transitions, and to use the acceleration potential of re-directing financial capital.
Highlights
Sustainability transitions require a fundamental redirection of finance flows, away from unsustainable towards new sustainable technologies and practices
Enhancing the representation of finance can bridge sustainability transition research with the fast-growing scholarship on sustainable finance, showing pathways how to overcome hurdles that the financial system poses for socio-technical transitions, and to use the acceleration potential of re-directing financial capital
The specific working of the financial system, and its precise role for sustainability transitions, are rarely considered by the literature. This gap is remarkable, given that financial capital is not a fungible resource that is instantaneously allocated to newly appearing technologies through frictionless capital markets, as assumed in many neoclassical economic models
Summary
Sustainability transitions require a fundamental redirection of finance flows, away from unsustainable towards new sustainable technologies and practices. The specific working of the financial system, and its precise role for sustainability transitions, are rarely considered by the literature (with few exceptions, see below). This gap is remarkable, given that financial capital is not a fungible resource that is instantaneously allocated to newly appearing technologies through frictionless capital markets, as assumed in many neoclassical economic models.
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