Cash greens everything around me? Identifying key barriers and drivers for advancing low-carbon investments in Denmark’s finance industry and evaluating the transition efforts of the industry

University essay from Lunds universitet/LUCSUS

Abstract: Meeting international climate goals require a major reallocation of global investment portfolios. However, in 2016, 74%. of all assets under management were still socially and environmentally unchecked. Research has started to address how finance can support the low-carbon transition, but little is known about how the financial sector itself perceives this transition. This thesis seeks to 1) identify key barriers and drivers for advancing low-carbon investments (LCI) in Denmark’s finance industry and 2) evaluate the industry’s LCI-integration until now. The thesis takes a mixed methods approach through surveys (n=11) and interviews (n=12) with finance professionals in Danish pension funds and financial intermediaries. Key LCI-drivers are identified as a) the risk/return profile of LCI, b) costumer/pension fund members’ preferences c) top-management, d) increased public awareness of climate change the role of institutional investors, e) expected future climate and energy policy and f) stranding risks for coal and oil sands. Key LCI-barriers are identified as a) a low LCI-supply, b) a lack of current and uncertainty of future climate and energy policy, c) low stranding risks for oil and especially gas and d) conservative organisational cultures. It is found that LCI-integration has progressed rapidly and that it is impacting investment decisions. Yet, it is restrained by a dominating logic of return-maximisation, which is grounded in prevailing organisational cultures and unlikely to change. Although it is still possible to integrate LCI further under current conditions, it will be necessary to compromise slightly on returns, if finance is to take a truly progressive role on climate change. The findings are relevant to anyone who wants to see finance take further steps towards sustainability and can be used to make work on sustainable finance more strategic.

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