Energy Finance and Sustainable Development

Dear Colleagues,

Energy finance is an interdisciplinary field that brings to the attention of researchers, practitioners and other stakeholders the link between the energy market and the financial sphere (Zhang, 2018). The first concern of stakeholders has been the impact of oil prices on capital markets. Oil is an important asset that is most highly traded in commodity exchanges, in both the spot market and the derivatives segments, as well as for institutional investment (Nakajima, 2019). Investors' interest in this commodity for both speculative operation and hedging purposes has led to the financialization of the energy market. The evolution of the price of this commodity has also had a significant impact on the prices of shares traded on the stock markets. Oil prices are also priced in US dollars, and this connection has created a direct relationship between oil prices and exchange rates. For these reasons, several studies have focused on the analysis of the influence of oil prices on securities, stock indices and exchange rates for both developed and emerging market economies (Hammoudeh & Aleisa, 2004; Sari et al., 2010 among others).

On the other hand, oil companies are in the spotlight of various stakeholders, due not only to the negative externalities they generate on the environment, but also to the green-washing strategies they have initiated to improve their public image by running corporate social responsibility (CSR) programs. The sustainable development policies of firms have also garnered a favorable response from portfolio investors. Nowadays, decisions in the capital markets are taken not only according to the risk–profitability criterion, but also based on Environment, Social and Governance (ESG) performance. Thus, the trend of the divestment of securities issued by oil companies has been on the rise. Recently, portfolio investors have been more interested in environment-friendly companies, such as those that produce renewable energy (Taghizadeh-Hesary et al., 2020; Sadorsky, 2021).

Nevertheless, global warming has also generated a concerted response from public authorities and financial institutions that have launched specific tools to manage mechanisms that reduce the adverse impact of energy creation and emissions on the environment. The reduction of carbon emissions is not a simple desideratum. In order to manage the process of the transition to a low-carbon economy, emission trading schemes have been established, and the carbon market was set up. The transition to a low carbon economy is a complex and lengthy process that requires significant financial resources. The involvement of international financial organizations such as the World Bank or the International Monetary Fund (Newell, 2011) ensures the coherence of the efforts for energy transition.

The capital market offers financing alternatives to bank lending. Bonds are the tools that are already used to mobilize funds available in the economy in order finance green projects. The interest of portfolio investors in such securities is high, considering the creditworthiness of the main issuers such as the World Bank or the European Bank for Reconstruction and Development (Milford et al., 2014).

The high costs and the risks involved in certain investment projects that produce renewable energy or have a less negative impact on the environment are generating a gap between the supply and demand for financial funds. To support this process, some governments have established state investment banks (SIBs) that provide financing for green projects (Geddes et al., 2018). In China, there is extensive involvement of  the government in the energy field, through both state-owned companies and state-owned financial institutions that provide financing for the internationalization of energy companies and the financing of projects, including foreign governments (Kong, B., and Gallagher, 2017).

This call for papers will cover a variety of theoretical and empirical topics related to energy finance, taking into account the efforts that are needed to meet the Sustainable Development Goals.

The Special issue is interested in papers related, among other things, to:

• energy finance and oil prices;
• oil prices and climate change (is there a role for COVID-19?);
• renewable energy and climate change;
• energy investments, the environment and the era of sustainable globalization;
• economic globalization and environmental degradation;
• use of energy resources in the presence of economic globalization;
• The Jevons paradox and the energy market, the green paradox and the energy market;
• CSR in the oil field.

References

Geddes, A., Schmidt, T. S., & Steffen, B. (2018). The multiple roles of state investment banks in low-carbon energy finance: An analysis of Australia, the UK and Germany. Energy Policy, 115, 158-170.

Gopal, S., Pitts, J., Li, Z., Gallagher, K. P., Baldwin, J. G., & Kring, W. N. (2018). Fueling global energy finance: the emergence of China in global energy investment. Energies, 11(10), 2804.

Hammoudeh, S., & Aleisa, E. (2004). Dynamic relationships among GCC stock markets and NYMEX oil futures. Contemporary Economic Policy, 22(2), 250-269.

Kong, B., & Gallagher, K. P. (2017). Globalizing Chinese energy finance: the role of policy banks. Journal of Contemporary China, 26(108), 834-851.

Milford, L., Saha, D., Muro, M., Sanders, R., & Rittner, T. (2014). Clean Energy Finance Through the Bond Market. Brookings Institution, Brookings Rockefeller Project on State and Metropolitan Innovation.

Nakajima, T. (2019). Expectations for statistical arbitrage in energy futures markets. Journal of Risk and Financial Management, 12(1), 14.

Newell, P. (2011). The governance of energy finance: the public, the private and the hybrid. Global Policy, 2, 94-105.

Sadorsky, P. (2021). A Random Forests Approach to Predicting Clean Energy Stock Prices. Journal of Risk and Financial Management, 14(2), 48.

Sari, R., Hammoudeh, S., & Soytas, U. (2010). Dynamics of oil price, precious metal prices, and exchange rate. Energy Economics, 32(2), 351-362.

Taghizadeh-Hesary, F., & Yoshino, N. (2020). Sustainable solutions for green financing and investment in renewable energy projects. Energies, 13(4), 788.

Zhang, D. (2018). Energy Finance: Background, Concept, and Recent Developments. Emerging Markets Finance and Trade, 54(8), 1687-1692.

Prof. Dr. Shawkat Hammoudeh
Prof. Dr. Mirela Panait,
Prof. Dr. Marian Siminică
Prof. Dr. Ahsan Akbar
Prof. Dr. Petra Poulova
Collection Editors

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