Greed is Good, Green is Better: Evaluating the 2018 EU Action Plan for Sustainable Finance
This paper critically analyzes the Sustainable Finance Action Plan (SFAP) which was introduced by the European Commission in 2018, and which aims to incentivize investments into environmentally friendly assets in the EU. The analysis proceeds in three stages. In the first part, the economic theory underlying the policy proposals is analyzed. It is recognized that the SFAP largely upholds neoclassical economic reasoning and presents the green investment gap as a market failure which is to be corrected through the internalization of the negative externalities of environmental pollution. In the second part, the shortcomings of this justification are analyzed. It is argued that viewing the green investment gap as a market failure is empirically inadequate and does not allow for the adoption of policies which would be necessary for achieving the purpose of the SFAP. In the third part, an alternative justification for a more interventionist approach for the incentivization of green investments is developed based on the democratic duties of investors in the European Union.