Role of sustainable finance in addressing negative external effects

Abstract

Purpose: the article deals with the problem of internalization of external effects in the sustainable development context. Discussion: sustainable development as a concept aims to mitigate negative externalities. Sustainable development is a very specific economic category, which requires an effective funding mechanism that should take into account a three-dimensional (economic, social, environmental) sustainability perspective. That the more instruments of sustainable finance are included in the financial system; the system is more sustainable and responsive to negative externalities and as result supports the achievement of sustainable development goals. Sustainable finance instruments include sustainable financial products, and among this group: green financial products influencing environmental quality. Results: world practice shows that the use of sustainable financing instruments, such as green bonds and loans, is expanding, what leads to a reduction in damage to the environment. The Russian market is not ready to use such banking products, which complicates the process of internalizing externalities.