Finance, Risk and Sustainable Development

A special issue of Journal of Risk and Financial Management (ISSN 1911-8074). This special issue belongs to the section "Sustainability and Finance".

Deadline for manuscript submissions: 31 August 2025 | Viewed by 14439

Special Issue Editor


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Guest Editor
Faculty of Economics and Business, Business Administration Department, University of Oviedo, 33071 Oviedo, Spain
Interests: corporate investment; mutual funds; IPOs; CSR; sustainable finance

Special Issue Information

Dear Colleagues,

Climate change and environmental deterioration pose a severe threat to the existence of human society. Finance plays a crucial role in changing this situation and this fact incorporates risk. Since the turn of the previous century, the globe has confronted major environmental concerns, such as environmental degradation due to human activity coupled with energy consumption that creates dangerous emissions. This situation has made policymakers and academics concerned enough to advocate for measures to eliminate or minimize carbon from the environment by reengineering activities responsible for CO2 emissions and engaging in eco-friendly practices. The Paris Climate Change Agreement (COP26) has played a pivotal role in mitigating the effects of climate change and kicking off a low-carbon global economy. The overall focus of this Special Issue is to provide an update analysis, from theoretical and empirical points of view, to improve and achieve sustainable development through the appropriate way in which to finance projects in order to reach the Sustainable Development Goals.

In this Special Issue, original research articles and reviews are welcome. Research areas may include (but are not limited to) the following:

  • Finance, climate change, and sustainability.
  • Risk and climate change.
  • How sustainable finance can help to reach sustainable development.
  • Effects of the adequate use of finance on the Sustainable Development Goals.
  • CSR, finance, and the Sustainable Development Goals.

I look forward to receiving your contributions.

Dr. Susana Álvarez-Otero
Guest Editor

Manuscript Submission Information

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Keywords

  • finance
  • climate change
  • sustainable finance
  • Sustainable Development Goals
  • CSR

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Published Papers (8 papers)

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Research

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18 pages, 260 KiB  
Article
Balancing Financial Risks with Social and Economic Benefits: Two Case Studies of Private Sector Water, Sanitation, and Hygiene Suppliers in Rural Vietnam
by Lien Pham
J. Risk Financial Manag. 2025, 18(4), 216; https://doi.org/10.3390/jrfm18040216 - 17 Apr 2025
Viewed by 188
Abstract
This paper examines the financial health risks that private sector water, sanitation, and hygiene (WASH) businesses in rural Vietnam face. It investigates the challenges faced by water operators and sanitation suppliers involved in donor-funded development projects aimed at supporting poor and vulnerable households. [...] Read more.
This paper examines the financial health risks that private sector water, sanitation, and hygiene (WASH) businesses in rural Vietnam face. It investigates the challenges faced by water operators and sanitation suppliers involved in donor-funded development projects aimed at supporting poor and vulnerable households. Through surveys and focus group discussions with 15 suppliers who worked in public–private partnerships, this research examines the financial risk factors affecting water and sanitation suppliers and their impact on financial viability through two case studies. For water operators, the risks primarily involve infrastructure management, operational costs, and revenue instability. In the sanitation sector, risks center around fluctuating material prices, limited business expansion capital, and household affordability. This study highlights the dual role of government and donor subsidies, which enhance service accessibility but potentially distort market dynamics. It also underscores the need for targeted financial and policy interventions, including better access to microfinance, regulatory improvements, and human resource development. The findings aim to inform strategies for government, donors, and private sector actors in similar WASH development contexts to enhance financial sustainability, ensuring inclusive WASH services in underserved areas. This paper contributes to policy discussions by proposing mechanisms to balance public–private collaboration while fostering market resilience and equitable access to WASH services in emerging economies similar to that of Vietnam. Full article
(This article belongs to the Special Issue Finance, Risk and Sustainable Development)
19 pages, 337 KiB  
Article
The Moderating Role of Worldwide Governance Indicators on ESG–Firm Performance Relationship: Evidence from Europe
by Rezart Demiraj, Enida Demiraj and Suzan Dsouza
J. Risk Financial Manag. 2025, 18(4), 213; https://doi.org/10.3390/jrfm18040213 - 14 Apr 2025
Viewed by 343
Abstract
Engaging in Environmental, Social, and Governance (ESG) activities entails costs that influence a firm’s financial and market performance. However, it is expected that the long-term benefits of ESG engagement outweigh these costs, leading to superior performance. Despite extensive research on the ESG–performance relationship, [...] Read more.
Engaging in Environmental, Social, and Governance (ESG) activities entails costs that influence a firm’s financial and market performance. However, it is expected that the long-term benefits of ESG engagement outweigh these costs, leading to superior performance. Despite extensive research on the ESG–performance relationship, findings remain mixed. This study examines the moderating effect of country governance, measured by the Worldwide Governance Indicators (WGIs), on the relationship between firms’ ESG scores and their financial and market performance in the European context. Using a two-stage least squares (2SLS) regression model and a dataset spanning 12 years (2011–2022) for 2083 listed European firms, we find that WGI significantly moderates the ESG–performance relationship. Our results indicate that ESG engagement alone has a negative impact on financial performance (ROA), suggesting that the costs associated with ESG investments often outweigh their short-term benefits. However, strong governance structures mitigate these costs, transforming ESG investments into value-enhancing activities. Conversely, ESG engagement positively influences market performance (Tobin’s Q), signaling long-term value to investors. Yet, in jurisdictions with strong governance frameworks, this effect diminishes, as ESG compliance becomes a baseline expectation rather than a differentiating factor. Full article
(This article belongs to the Special Issue Finance, Risk and Sustainable Development)
27 pages, 470 KiB  
Article
Environmental Risk Concern and Short-Term IPO Performance of Green Stocks During the COVID-19 Crisis Period
by Jang-Chul Kim, Sharif Mazumder and Pritam Saha
J. Risk Financial Manag. 2025, 18(3), 157; https://doi.org/10.3390/jrfm18030157 - 14 Mar 2025
Cited by 1 | Viewed by 820
Abstract
This study examines the effect of firms’ greenness on IPO underpricing and subsequent short-term performance during the COVID-19 crisis period. Using 173 U.S. IPOs, we find that IPO underpricing is more pronounced for brown firms (i.e., firms have higher carbon footprints or operate [...] Read more.
This study examines the effect of firms’ greenness on IPO underpricing and subsequent short-term performance during the COVID-19 crisis period. Using 173 U.S. IPOs, we find that IPO underpricing is more pronounced for brown firms (i.e., firms have higher carbon footprints or operate in pollution-intensive industries) than for green firms (i.e., firms are engaged in environmentally sustainable practices). However, when we account for the exogenous change in environmental concerns, we find that an increase in environmental concerns causes lower initial day returns for brown firms. Later, we examine the post-IPO 3-month (6-month) holding period returns and find that brown firms earn higher returns than green firms when environmental concerns increase. Additionally, cross-sectional regressions indicate that firm-level characteristics, such as offer price and Hi-Tech, are positively associated, while R&D, leverage, and profitability are negatively associated with IPO. Full article
(This article belongs to the Special Issue Finance, Risk and Sustainable Development)
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21 pages, 1428 KiB  
Article
Implementation of Sustainability Strategies in Operations and Abnormal Stock Returns Under Uncertainty: Evidence from Companies Listed on the Vietnamese Stock Market During the COVID-19 Outbreak
by Nguyen Thi Ngoc Hoa, Khuu Thi Phuong Dong, Nguyen Kim Khanh and Nguyen Minh Canh
J. Risk Financial Manag. 2025, 18(3), 146; https://doi.org/10.3390/jrfm18030146 - 10 Mar 2025
Viewed by 574
Abstract
This study examines the effects of implementing sustainable strategies in operations on the abnormal stock returns of companies listed on the Vietnamese stock market under uncertain conditions, using an event study and difference-in-differences analysis. Daily trading data were obtained from 107 companies listed [...] Read more.
This study examines the effects of implementing sustainable strategies in operations on the abnormal stock returns of companies listed on the Vietnamese stock market under uncertain conditions, using an event study and difference-in-differences analysis. Daily trading data were obtained from 107 companies listed on the Vietnamese stock market from 2 January 2020 to 31 March 2020 (~6313 observations included in the sampling). Of these, 41/107 (38.3%) and 66/107 (61.7%) did and did not implement sustainability strategies in their operations, respectively. The feasible generalized least-squares regression model indicated a positive impact of the implementation of sustainable strategies in operations on abnormal stock returns of the companies during the COVID-19 pandemic (p < 0.01 in the context of the COVID-19 pandemic). The results underline the implementation of sustainability strategies in the operations of companies as a critical tool to mitigate damage under uncertain conditions, enhance resilience, and achieve long-term competitive advantages. Full article
(This article belongs to the Special Issue Finance, Risk and Sustainable Development)
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21 pages, 878 KiB  
Article
Loan Pricing in Peer-to-Peer Lending
by David D. Maloney, Sung-Chul Hong and Barin Nag
J. Risk Financial Manag. 2024, 17(8), 331; https://doi.org/10.3390/jrfm17080331 - 1 Aug 2024
Viewed by 1367
Abstract
Lenders writing loans in the peer-to-peer market carry risk with the anticipation of an expected return. In the current implementation, many lenders do not have an exit strategy beyond holding the loan for the full repayment term. Many would-be lenders are deterred by [...] Read more.
Lenders writing loans in the peer-to-peer market carry risk with the anticipation of an expected return. In the current implementation, many lenders do not have an exit strategy beyond holding the loan for the full repayment term. Many would-be lenders are deterred by the risk of being stuck with an illiquid investment without a method for adjusting to overall economic conditions. This risk is a limiting factor for the overall number of loan transactions. This risk prevents funding for many applicants in need, while simultaneously steering capital towards other more liquid and mature markets. The underdeveloped valuation methods used presently in the peer-to-peer lending space present an opportunity for establishing a model for assigning value to loans. We provide a novel application of an established model for pricing peer-to-peer loans based on multiple factors common in all loans. The method can be used to give a value to a peer-to-peer loan which enables transactions. These transactions can potentially encourage participation and overall maturity in the secondary peer-to-peer loan trading market. We apply established valuation algorithms to peer-to-peer loans to provide a method for lenders to employ, enabling note trading in the secondary market. Full article
(This article belongs to the Special Issue Finance, Risk and Sustainable Development)
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22 pages, 2467 KiB  
Article
Reforming Sustainability-Linked Bonds by Strengthening Investor Trust
by Frederic de Mariz, Pieter Bosmans, Daniel Leal and Saumya Bisaria
J. Risk Financial Manag. 2024, 17(7), 290; https://doi.org/10.3390/jrfm17070290 - 8 Jul 2024
Viewed by 2695
Abstract
This paper explores the emergence of sustainability-linked bonds (SLBs) as an innovative instrument to finance sustainability objectives. SLBs are any type of bond instrument for which the financial characteristics vary depending on whether the issuer achieves predefined sustainability objectives. SLBs were launched in [...] Read more.
This paper explores the emergence of sustainability-linked bonds (SLBs) as an innovative instrument to finance sustainability objectives. SLBs are any type of bond instrument for which the financial characteristics vary depending on whether the issuer achieves predefined sustainability objectives. SLBs were launched in 2019, represent 7% of labeled bonds, and now exceed USD 250 billion. In the context of the growth of sustainable finance and concerns of greenwashing, this paper asks whether SLBs are an effective mechanism to attract sustainable finance. Drawing on a complete revision of the literature and interviews with practitioners, the findings highlight the potential of SLBs to contribute to sustainability financing, especially in hard-to-abate sectors. Recommendations include defining standardized KPIs based on a materiality assessment, requesting SPTs to be supported by science, and tailored step-up mechanisms. The academic literature and experts converge in their description of greenwashing risks posed by SLBs, their signaling effect, and the lack of sophistication in SLB pricing, in particular the optionality represented by step-ups. The literature differs from the practitioners’ perception on the existence of an issuance premium. Enhancing the design of SLBs represents an opportunity to add rigor to sustainable finance and better price externalities, where material topics have an explicit impact on the cost of funding. Full article
(This article belongs to the Special Issue Finance, Risk and Sustainable Development)
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15 pages, 2456 KiB  
Article
Renewable Energy Stocks’ Performance and Climate Risk: An Empirical Analysis
by Lingyu Li, Xianrong Zheng and Shuxi Wang
J. Risk Financial Manag. 2024, 17(3), 121; https://doi.org/10.3390/jrfm17030121 - 18 Mar 2024
Viewed by 2713
Abstract
This article studies the relationship between renewable energy stocks’ performance and climate risk. It shows that publicly held renewable energy stocks underperform as a reaction to climate policy information releases, modeled by feed-in tariff (FIT) legislation announcements. The study examined stock price behaviors [...] Read more.
This article studies the relationship between renewable energy stocks’ performance and climate risk. It shows that publicly held renewable energy stocks underperform as a reaction to climate policy information releases, modeled by feed-in tariff (FIT) legislation announcements. The study examined stock price behaviors 2 days before and 30 days after FIT policy announcements. The stock sample used in the study has 3702 firm-day combinations, which included 180 cleantech firms and 32 events from 2007 to 2017. Based on the residual analysis of the sample’s abnormal return, it indicated that the FIT announcements are associated with significant declines in returns. The cumulative abnormal return until Day 18 was a significant −0.83%, while the average abnormal return on the day was −0.16% at normal levels. The study partially excluded the likelihood of a transitory result by varying the measurement horizon. It also adopted both the market model and the Fama–French three-factor models to rule out model misspecification when estimating abnormal returns and thus increased the robustness. In fact, the results were stable to changes in estimating the model’s specifications. In addition, the study compared the portfolio’s performance with mimicking portfolios in terms of size, book-to-market equity (BE/ME), and the firms’ geographic location. It demonstrated that the documented anomaly of the portfolio of renewable energy companies is robust. Full article
(This article belongs to the Special Issue Finance, Risk and Sustainable Development)
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Review

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15 pages, 772 KiB  
Review
Does Islamic Sustainable Finance Support Sustainable Development Goals to Avert Financial Risk in the Management of Islamic Finance Products? A Critical Literature Review
by Lukman Raimi, Ibrahim Adeniyi Abdur-Rauf and Saheed Afolabi Ashafa
J. Risk Financial Manag. 2024, 17(6), 236; https://doi.org/10.3390/jrfm17060236 - 6 Jun 2024
Cited by 7 | Viewed by 4419
Abstract
Policymakers, governments, and Islamic financial institutions are increasingly focusing on sustainable development, leading to an in-depth examination of current sustainable finance practices, projects, and product portfolios. This study examines the role of Islamic sustainable finance (ISF) in promoting Sustainable Development Goals (SDGs) to [...] Read more.
Policymakers, governments, and Islamic financial institutions are increasingly focusing on sustainable development, leading to an in-depth examination of current sustainable finance practices, projects, and product portfolios. This study examines the role of Islamic sustainable finance (ISF) in promoting Sustainable Development Goals (SDGs) to avert financial risk in the management of Islamic Finance Products (ISFP). Through qualitative analysis, the study conducts a critical literature review (CLR) that incorporates conceptual, theoretical, and empirical perspectives on ISF and SDGs and addresses two specific research questions. Our study examines over 48 journals from 2010 to 2024 and provides insights into how ISF advances the SDGs across all environmental, social, and economic dimensions. It also highlights that ISF promotes green entrepreneurship by investing in sustainable projects, supporting SMEs, and offering alternative financing. ISF also promotes financial stability, justice, and growth and is consistent with the principles of Maqasid al-Shari’ah. Key ISF mechanisms that promote the SDGs include Islamic Green Sukuk, Socially Responsible Investment Funds, Islamic Microfinance, and Islamic Impact Investing. Integrating Islamic ethical principles into financial activities is crucial for inclusive and sustainable economic development. These qualitative insights are critical for policymakers, Islamic financial institutions, Halal entrepreneurs, environmentalists, and investors to understand the potential of Islamic social finance (ISF) to support sustainable practices, projects, and portfolios. Furthermore, the ISFs alignment with Maqasid al-Shari’ah highlights its importance in promoting sustainable development while mitigating financial risk in ISFPs management. The study offers robust contributions to the existing literature to provide comprehensive insights into how ISF can be effectively used to promote SDGs. Full article
(This article belongs to the Special Issue Finance, Risk and Sustainable Development)
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