Theoretical Insights into Sustainable Financial Models: The Obstacles and Coalitions

This chapter provides a comprehensive theoretical study of sustainable finance by charting its progression from exclusionary practices (Sustainable Finance 1.0) to an integrated environmental, social, and governance (ESG) framework (Sustainable Finance 2.0), and ultimately to purpose-driven finance aligned with societal and environmental objectives (Sustainable Finance 3.0). The chapter critiques the limitations of traditional financial models that prioritize short-term gains and identifies key systemic challenges such as insufficient private sector initiative, short-termism, and aversion to change. It highlights the necessity for structural reforms and multi-stakeholder coalitions to foster long-term sustainable investments. This analysis of various worldwide taxonomies and regulatory frameworks underlines the influence of financial institutions and governments in developing comprehensive and responsible sustainable finance ecosystems. Moreover, this chapter offers a practical framework for Sustainable Finance 3.0, which prioritizes social and environmental impact over financial profit creation. It provides a road map for bringing financial institutions into alignment with the sustainable development goals (SDGs). This study ultimately proposes a fundamental paradigm shift in global finance, positioning finance as a transformative force for sustainable development rather than merely a tool for profit maximization.