Determinants of Sustainable Finance Flows: A Literature Review

  • Program Climate & Sustainability Climate & Sustainability
  • Type Discussion paper
  • Date 25 June 2025
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Abstract

Sustainable finance has gained remarkable momentum over the past decade, but its global allocation remains uneven, with emerging market and developing economies (EMDEs) struggling to attract the capital required to meet ambitious climate targets. This shortfall threatens progress toward limiting global warming while amplifying existing socioeconomic disparities between nations. In light of these challenges, this paper offers a comprehensive review of the literature to pinpoint the determinants underlying the global distribution of sustainable finance. We broadly identify four key factors shaping the sustainability-related capital allocation: 1) investor preferences and perceptions on sustainability and climate change, 2) risks (climate-related and conventional), 3) ESG infrastructure (sustainability ratings and transparency), and 4) the role of government (policies and regulations). This review article underscores that the uneven distribution of sustainable debt flows is a reflection of broader structural and institutional disparities. The insights presented in this paper highlight the urgent need for targeted policy interventions, particularly in emerging and developing economies, to improve ESG infrastructure, enhance regulatory frameworks, and de-risk sustainable investments to attract private capital at the scale required for effective climate action.

Authors

Akin Cilekoglu

Akin Cilekoglu

Postdoctoral Researcher- Climate & Sustainability Dr. Cilekoglu is a Postdoctoral Researcher in the Climate & Sustainability program. His current research covers understanding sustainable finance practices,…

Dr. Cilekoglu is a Postdoctoral Researcher in the Climate & Sustainability program. His current research covers understanding sustainable finance practices, the implications of climate change, and the responses of firms to climate policy initiatives. He holds a Ph.D. in Economics from the University of Barcelona and an M.Sc. in Economics from Catholic University in Milan. He was previously a Lecturer at Istanbul Bilgi University and a Visiting Researcher at both LMU in Munich and METU in Ankara. Prior to joining KAPSARC, he worked as a Climate Policy Consultant for a political party.

Expertise

  • Sustainable Finance
  • Environmental Economics
  • Applied Econometrics

Publications See all Akin Cilekoglu’s publications

Fatih Yılmaz

Fatih Yılmaz

Senior Fellow-Climate & Sustainability Dr. Yilmaz currently works as a senior fellow I in the Climate and Sustainability program. His current research agenda aims…

Dr. Yilmaz currently works as a senior fellow I in the Climate and Sustainability program. His current research agenda aims to enhance our understanding of the financial and economic consequences of the sustainable energy transition and to design effective policies to balance risk and growth prospects.

Prior to joining KAPSARC, Dr. Yilmaz worked as an economist at the Central Bank of the Republic of Turkey, where he was actively involved in the research and the design of policies for the private and banking sectors. He also worked as a consultant for the World Bank and spent a year as an assistant professor of economics at ADA University.

He has authored various academic and policy articles and attended academic conferences and workshops. He holds a Ph.D. in economics from the University of Calgary.

Expertise

  • Sustainable Finance and Investment
  • Applied Banking and Finance
  • Corporate Taxation
  • Public Economics
  • Applied Micro-Econometrics

Publications See all Fatih Yılmaz’s publications

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