Towards a Green Techno-Economic Paradigm - The implications of EUs strategy to finance a sustainable growth on industry dynamics from a neo-Schumpeterian perspective

University essay from Göteborgs universitet/Graduate School

Abstract: The consequences of climate change are becoming more and more evident. Environmentalshocks in terms of massive forest fires, ferocious cyclones and droughts have become morefrequent leading to mass migrations and business disruptions. It has now been declared that wehave reached a tipping point and that further global warming is inevitable. Rather thanpreventing anthropogenic global warming, attention has shifted towards mitigating how muchthe temperature will rise. These consequences of climate change significantly impact thefinancial system. To mitigate the risks of climate change, the European Union have launched astrategy which aims to align the financial system with a low-carbon economy by theimplementation of hard laws to incentivize private capital flows towards sustainableinvestments. These hard laws will significantly impact the current industry dynamics. Whatwas once a company’s core competitive advantages may be transformed into core rigidities.This research aims to act as a source of insight for organizations who are indecisive in whatway they should take going forward and how they should tackle the increasingly prevalentsustainability agenda. This is done by answering the question what implications the EU strategyon financing a sustainable growth will have on industry dynamics.This research has been conducted based on a mixed method approach using both a quantitativeevent study and qualitative semi-structured interviews. The event study aims to determine theimpact of a successful Paris Agreement on companies which due to their operating industrymake them inherently sensitive towards international environmental policies. The semistructuredinterviews have been conducted with global experts within the fields ofsustainability, sustainable finance and risk management. Additionally, to get a holisticperspective of the issue in question, interviews with global industry leaders and policy makershave been conducted.The results from the event study, interviews with experts, industry leaders and policy makers’show evidence that we are currently on the verge of a new green techno-economic paradigm.However, a transition towards such a paradigm is hindered by the interconnectedness andinterdependence of the current economic system as well as the current dynamics of the relativecost structure. A transition towards a green techno-economic paradigm has the potential to onseta creative destruction of current industries in terms of displacing incumbents, stranding assetsand hampering poverty eradication. This research concludes that the EUs strategy to finance asustainable growth will have implications on the industry dynamics in terms of catalyzing sucha transition while simultaneously mitigating the risk of creative destruction. Additionally, theEUs strategy on financing a sustainable growth aims to strengthen the competitiveness ofEuropean firms in the long run by establishing first mover advantages within the field ofsustainability.

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