Proactive Eco-Innovation and Firm Financial Performance

Dear Colleagues,

The academic field and businesses alike are paying increasing attention to innovation in green technology due to their potential environmental and financial performance benefits. However, a limited amount of research has been carried out on the effect of proactive eco-innovation on corporate financial performance.  

Eco-innovation incorporates sustainability throughout all business operations based on life cycle thinking and in cooperation with partners across the value chain. Eco-innovation entails a coordinated set of modifications or novel solutions to products, processes, market approach and organizational structure, which leads to a company’s enhanced performance and competitiveness. This approach can help enterprises access new and expanding markets, increase productivity, attract new investment into the business, increase profitability across the value chain, and help them stay ahead of regulations and standards, the ultimate goal being to maintain our Earth environment at the same time, as in the latest paragraph in the UN research on sustainable development in March 2021.

Therefore, behind ecological innovation is environmental climate change and energy issues that are actively discussed and solved all over the world, and we all know that industrial development must be related to energy, and energy use also affects the environment to varying degrees. The change in the environment makes us clearly see the change in the Earth's climate in many facets, and this is a vicious circle. While pursuing enterprise development and economic development, how to increase economic performance and decrease environmental damage is the biggest significance behind ecological innovation.

In the European Union (EU), it was estimated that reaching the EU 2030 climate and energy targets requires circa EUR 180 billion per year of new investments in renewable energy and energy efficiency (European Commission, 2018; HLEG, 2018). At the global level, the investments needed to achieve the low-carbon transition are estimated to be in the range of USD 1.6–3.8 trillion annually until 2050 for supply-side energy system investments alone (IPCC, 2018). However, despite a record high of USD 612 billion in 2017, global climate finance flows are still far from closing the green investment gap (CPI, 2019). On the one hand, the climate misalignment of investments hampers the feasibility to achieve the climate targets. On the other hand, it could drive new sources of risk for asset price volatility and financial stability at the individual and systemic levels (Monasterolo et al., 2017).

Climate change has been one of the defining challenges in academic research. Climate change influences the health and well-being of nearly every person in the rest of the world. In addition, climate change results in an aggregate risk to the economy and the financial system (see, e.g., Litterman et al., 2020). The tool of financial and economics, designed for valuing and managing risk can benefit society assess and respond climate change risk and thus improves firm financial performance.

Early research proposed by Nobel Laureate William Nordhaus (1970) has uncovered the interactions between climate change and the economy. The study concludes the potentially large negative feedback effect on future economic activity.

This Special Issue aims to publish works related to environmental risks and eco-innovation such as climate change risk, renewable energy, and energy efficiency. In particular, our Special Issue highlights climate finance to explore the risk, and risk preferences play an important role in dictating the optimal policy response to climate change.

European Commission, 2018. REGULATION OF THE European Parliament AND OF THE COUNCIL: establishing a Programme for the Environment and Climate Action (LIFE) and repealing Regulation (EU) No 1293/2013.

IPCC, 2018. Global Warming of 1.5C - Summary for Policymakers. Technical Report. Intergovernmental Panel on Climate Change.

CPI, 2019. Global Landscape of Climate Finance 2019. Climate Policy Initiative, London Technical Report. ⟨https://climatepolicyinitiative.org/publication/global-climate- finance-2019/⟩

Monasterolo, I., Raberto, M., 2017. Is there a role for Central Banks in the low-carbon transition? A Stock-Flow Consistent modelling approach. SSRN Work. Pap. November, 1–32.10.2139/ssrn.3075247.

Dr. FengShen Chien
Dr. Muhammad Sadiq
Dr. Chingchi Hsu
Guest Editors

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• eco-innovation
• green technology
• green investment
• climate change
• financial performance
• environmental risk
• renewable energy
• energy efficiency
• climate finance