Green Finance Instruments, FinTech, and Investment Strategies

Green financing in the energy sector is vital for sustainable capacity addition. However, energy projects are typically planned over a 20 or 25, or even 30-year horizon, and there are several interdependent and conflicting aspects. This chapter first presents the problem of financing clean energy projects and the associated challenges and risks. Major aspects influencing cash flows, energy flows, and financial risks are illustrated with suitable examples. Opportunities to mitigate the risks are presented. Multicriteria decision methods have been applied to determine the best energy mix options for reducing carbon emissions and low-risk investment prospects. Case studies with both quantitative and qualitative treatment are presented.

This paper examines the association between bank credit ratings and corporate social responsibility (CSR). The sample includes large publicly listed banks in the United States during fiscal years 2000–2016. Our findings indicate that CSR policies positively affect banks’ credit ratings. We further test each dimension of the MSCI KLD database’s ESG ratings and find that the CSR components measuring diversity and employee relations are particularly relevant in the credit rating context.

Sustainable development has been focused mostly on protecting the environment for future generations with the goal of preserving scarce resources. A more sustainable development strategy goes beyond just climate change but embraces sustainable practices within the economy, which concerns equality, justice, and risk sharing that will bring about long-term socioeconomic change. For sustainability to be holistic, there must be an assessment of what causes unsustainability. We deliberate on five of them.

In this chapter, we discuss nine types of innovative sustainable financing that will help individuals and businesses achieve long-term sustainable objectives. We then provide an analysis of innovative Green Financing Programs for the agriculture sector in Indonesia.

The article explores the ethical and socially responsible investments decision in the Islamic financial framework, how religious beliefs influence decision making, and what balance can be found between the heart, mind, and money.

With reference to ethical and prosocial behavior in the Islamic financial decision framework, this paper sheds light, theoretically and experimentally, on the inquiry about whether and why principals’ charitable contributions have a favorable altruistic impact or not on agents’ level of effort and commitment in the participatory financing contractual process?

we use an illustrative analysis as well as a lab experiment using a streamlined principal-agent set in which the Islamic banking firm (principal) determines whether or not to contribute a specified amount to a charity, followed by a phase where an informed agent is notified of the bank choice (partner in the participatory financing contract) chooses his effort level and engagement in the light of the bank decision.

As anticipated, we find that the entrepreneur, who is a partner in the participatory financing contract (agent), is more willing to decide to afford additional levels of effort when the Islamic banking firm (principal) has donated or is willing, to a charity and announces it.

Almost all the CEOs of the SMEs interviewed are pro-social, as they choose the Islamic bank for religious motifs to be compliant in their actions with their beliefs and agree to support the charitable giving of the Islamic financial institution and believe that it has a value raising of the over-roll payoff and thus give them the incentive to perform their project with higher levels of effort.

It allows the agent (entrepreneur funded by the Islamic bank) to communicate about the indirect social responsibility of its business and gives him pride to be part of the achievement and increase the belonging feelings and the esteem needs, the desire for reputation or respect from others (Maslow).

We sort out the different instruments by changing the intentionality, nature, announcement, and size of the donation and how it affects the behavior of the financed entrepreneur. Variations in the agent’s effort levels, intentionality, and, amount of the donation made by the Islamic banking firm will be increased, allowing then higher returns and participating indirectly in financing the donation.

We find significant proof for reciprocal altruism (This concept of Altruism was introduced by Auguste Comte (1798–1857) French philosopher as antonym of egoism that means someone’s behavior that is not free and can have a certain benefits to another person. Reciprocal altruism is altruism with the assumption that the beneficiary, in return will act identically in the future). as a driver for agents’ decisions on choosing their levels of effort and, thus, their payoff as reactions to the principal donating decisions. Also, the distributional concerns and warm glow motives seem to significantly affect the commitment and afforded level of effort.

Furthermore, we examined whether donating decisions are strategic or not. We find that when the Islamic banking firm (principal) strategically gives to encourage greater work, and the funded partner (agents) praises altruistic deeds with additional marginal effort when these investments are implemented in a strategic context.

In 2017, in support of sustainable development, Bank Negara Malaysia issued the Strategy Paper on Value-based Intermediation (VBI) to achieve Shariah’s objectives through practices, conducts, and offerings that positively impact the economy, environment and community. In addition to the VBI initiative, Bank Negara Malaysia issued the Climate Change and Principle-based Taxonomy (CCPT), which specifically addresses climate change issues. Under the VBI, Malaysia’s Islamic Banking Institutions (IBIs) intermediation function has expanded from focusing on Shariah compliance to creating value for the economy, environment and society. Conversely, the CCPT is an assessment and classification system of climate risk-related exposure of financial institutions (FIs) in Malaysia. It is distinctive from existing taxonomies because the CCPT assesses the economic and overall business activities of the FIs’ customers and how these impact the climate. This chapter examines the VBI and CCPT as sustainable banking regulatory frameworks to understand how adopting this sustainable banking regulatory framework can positively impact the community, the climate and the broader environment. It argues that due to the different emphasis of the VBI initiative from the focus of Malaysia’s current Islamic finance legal framework on compliance of Shariah, the VBI initiative can only be voluntary on IBIs until a policy decision is made to amend the legal framework accordingly. In addition, this chapter highlights certain considerations for IBIs and FIs in Malaysia should they consider integrating the sustainable banking regulatory framework into their business strategy and operations. It also recommends measures to be implemented for businesses seeking funding or investment from the IBIs and FIs.

The digital economy is considered key to the success of sustainability as part of Oman Vision 2040. Therefore, this chapter aims to examine its relationship with investments from 1985 to 2020 using three proxies for the digital economy, namely infrastructure, empowering society and technological economic growth. The findings showed that the former two had a significant positive relationship with investment, while the latter had a significant negative relationship with investment. The primary conclusion has enhanced the understanding of the uses of modern technology, leading to support for the diffusion of innovation theory to obtain the maximum economic benefit. Furthermore, increased digitalisation boosted local investments while the government prepared strategies for foreign investment, a scenario that resulted in high cooperation between the private and public sectors.

With a focus on the regulatory environment in Saudi Arabia, this chapter provides a descriptive evaluation of the regulatory sandbox and its importance as a modern and creative financial technology tool. Saudi Arabia was one of the first Arab countries to regulate the sandbox. The Saudi FinTech initiative was launched in collaboration between the two official institutions regulating the financial sector (the Central Bank and the Capital Market Authority). Both institutions have built a sandbox regulatory environment to stimulate FinTech innovation. Finally, this chapter also reviewed some case studies. It showed their economic effects, including two promising experiments for startups: Buy now, pay later, and digital savings associations. This chapter suggested the need to support and enhance these two activities in the Saudi financial sector, which could be an inspiring experience for other Arab countries.

This systematic literature review and bibliometric analysis are intended to provide qualitative and quantitative knowledge on our research domain—risk factors affecting cryptocurrency market returns. Numerous review papers and research papers are considered for this study, published during 2019–2021. Out of these most influential papers were considered for thorough content analysis. These papers were segregated based on the resulting outcome of bibliometric analysis. Three major themes were identified using the clustering technique viz. cryptocurrency technology, markets and business aspects of cryptocurrency, security and governance. These clusters identified prominent keywords in this research domain and helped identify major and broader issues related to cryptocurrency markets. Furthermore, a detailed study was conducted on stablecoin, one of the highly proposed solutions for mitigating the risk of cryptocurrencies, as suggested by most of the authors we studied during this research (mentioned in the clusters under study). The correlation of AI with cryptocurrency is reviewed in prospects of pattern analysis of cryptocurrency price drivers. A research gap has also been identified, giving researchers a pathway to follow and help mitigate the crypto market risks.

Equity crowdfunding is one type of crowdfunding that is growing rapidly in Indonesia. Equity crowdfunding can be considered for start-ups and Small and Medium Enterprises (SMEs) because the costs are relatively cheaper than loans. But until now, there are no regulations governing Shariah compliance in applying equity crowdfunding in Indonesia. This chapter aims to analyze the operation of equity crowdfunding companies in Indonesia to evaluate equity crowdfunding in terms of the Shariah compliance model with qualitative and quantitative approaches.

The worldwide financial technology (FinTech) revolution is well underway. Given the centrality of banks in the financial system, it is vital to comprehend the risks and opportunities that FinTech presents to banks, their impact on the primary activities of financial intermediaries, and their involvement in modern financial ecosystems. There is a dearth of studies on Fintech and Banking in the Indian context. The current study tries to fill this gap by examining the expanding literature on FinTech-enabled services and the opportunities and challenges for Indian banks.

Furthermore, the rise of FinTech has allowed new competitors such as start-ups, BigTech, and neo banks or challenger banks to enter the financial services business. The study revealed that Bank Tech, Cryptocurrencies, Insurtech, Remittance, Mobile Payments, Consumer Finance, Investment Tech, Accounting, Alternative Lending, and Payments Tech are some of the Fintech-enabled services in India.

FinTech companies benefit from a more level-playing field than banks because they are less regulated. Nonbank FinTech firms might challenge banks in specific product categories where success is not related to what makes banks unique—namely, deposit-gathering capabilities and the possibility for synergies with borrowers provided by deposits—due to the unequal playing field.

In the past few decades, there has been a technology revolution across the world, and along with the progression, there has been a major outcome in the form of environmental degradation. Even when the earth is witnessing environmental degradation and climate change, countries have awakened to improve their financial activities. Curtailing financial expenses and optimum utilization of financial resources are now considered one more solution to environmental challenges. The organizations’ green and low-carbon transformation now becomes the major business policy across the industries. Green finance is a monetary form and process of reducing carbon footprints and eco-friendlier business formats and processes. Business corporations, NGOs, researchers, academicians, and society have found green finance a catalyst in balancing our economy and nature. The world is designing a monetary system to create and develop eco-friendly systems that will decrease ozone-layer depletion, control pollution, and increase green activities. This monetary system would work to protect the environment along with increasing organizational revenues. Green finance involves collecting economic resources to tackle climate change and environmental issues. It is a way of sustainable finance focusing on environmental, social, and governance (ESG) issues and risks, aiming to increase long-term investments in sustainable economic activities and projects. This chapter will explore the role and significance of green finance in creating a sustainable financial system to address the issues of environmental degradation. In this chapter, the term green finance will be described in a boarder sense.