Remittances and Financial Inclusion in Development

In this paper we focus on the relationship between remittance inflows and financial inclusion in developing countries. We present single equation estimates on remittances and financial inclusion, and system estimates in which economic growth is explained by e.g., financial inclusion, and financial inclusion by, e.g., remittances inflows. These regressions clearly confirm our main hypothesis that remittances have a development impact through their effect on financial inclusion. Overall, our paper indicates the importance of studying the effects of remittances in developing countries. Remittances, in terms of size, are not only one of the main capital inflows in developing countries, often even more substantial than ODA, but they also appear to have a robust positive effect on economic growth.capital flows, remittances, finance

Financing sustainable innovation : From a principal-agent to a collective action perspective

The importance of transitioning to a sustainable economy - one which safeguards ecological life-support systems and provides equity within and between generations - has become increasingly urgent. A crucial ingredient of such a transition is sustainable innovation by new or existing enterprises, to develop business activities that realize both societal and financial value. However, obtaining finance for sustainable innovation is often a challenge due to both principal-agent and (double) externality problems. While society benefits from investments into sustainable innovation, the – financial and societal - return for individual financiers is highly insecure. This dissertation explores how to enable finance for sustainable innovation, with a focus on banks and crowdfunding platforms. It makes use of two theoretical lenses. First, it studies how to overcome principal-agent problems through different lending technologies. Second, and more novel, it takes a collective action perspective to address the double externality problem embodied in sustainable innovation finance. This research fills a gap because there exist empirically well-defined mechanisms for solving collective action problems that have not yet been applied to the finance domain. Furthermore, the dynamics of collective action appear particularly relevant in the emergence of technologically driven, decentralized financial instruments like crowdfunding. This dissertation draws conclusions regarding the role of relationships, cash flows and assets as enablers of sustainable innovation finance, as well as regarding motivations of crowdfunders to undertake such investments. It highlights the challenge of enabling sustainable innovation finance while guarding the quality of the investment decisions in line with the motivation of the financier

Can the EU taxonomy for sustainable activities help upscale investments into urban nature-based solutions?

We analyze the potential of the European Union (EU) Taxonomy (ET) for Sustainable Activities to mobilize investments for the sustainability transition toward urban nature-based solutions (UNBS). We map the current investment landscape of UNBS in Europe and combine this mapping with document analysis of UNBS inclusion in the ET to understand how the ET might help overcome the well-documented barriers to UNBS finance. We suggest that the ET has a legitimizing effect on UNBS as climate investments, which can support their uptake, but also conclude that only some UNBS subtypes are explicitly included when they fit with existing investment classes. In particular, the ET (1) disregards innovative - and specifically urban - UNBS types and (2) fails to provide incentives for investments that can deliver multiple sustainable objectives, which would enhance the investment case for UNBS. Since the current investment landscape of UNBS is characterized by a strong presence of public actors and a high incidence of co-financing, we recommend that public actors leverage the ET to obtain private funding for UNBS via (green) bond issuance and public-private co-finance instruments. Our analysis indicates that the ability of the ET to upscale investments for specific sustainability transitions depends on the interplay among their current investment landscapes, specific financing barriers, and explicit inclusion in the ET

Estimating the social value of nature-based solutions in European cities

By implementing nature-based solutions (NBS), cities generate value for their residents, such as health and wellbeing. We estimate the aggregate social value to urban residents of 85 NBS projects implemented across Europe and find that the majority yield attractive social returns on investment. We offer a new metric to support investments for NBS by public and private actors for whom social value creation to residents is a core objective

The wisdom of the crowd in funding

Crowdfunding has enabled large crowds to fund innovative projects. This type of funding might tap into the wisdom of crowds who were previously disconnected from the funding process. We distinguish between in-crowd and out-crowd funders (with and without ties to project creators) in order to test for heterogeneity in their information use. Based on the analysis of a large-scale survey amongst project funders, this paper shows that in-crowd investors rely more on information about the project creator than out-crowd investors. Out-crowd investors do not seem to attach more importance to information about the project itself than in-crowd investors, except in the case of donation-based crowdfunding. For financial return crowdfunding, financial information becomes less important once a strong relationship with the project creator is established. Our study allows project creators to target information to specific audiences based on their relationship strength across different types of crowdfunding projects

Policy mixes for mainstreaming urban nature-based solutions: An analysis of six European countries and the European Union

Nature-based solutions (NBS) are multifunctional and cost-effective innovations delivering urban sustainability, but they are not yet mainstream in urban development. This can be explained by persistent structural conditions in the urban infrastructure regime, resulting in barriers such as lack of collaborative governance, inadequate knowledge and limited funding availability. In this paper we argue that (supra)national governments could play an important role in breaking down these barriers by employing policy instruments and strategically combining these into policy mixes targeting multiple regime structures. By means of an empirical analysis across six European countries and the European Union (EU), we provide an overview of regulatory, financial and soft (supra)national policy instruments supporting urban NBS mainstreaming and how these are combined in policy mixes across cases. In addition, we investigate policy mix comprehensiveness by mapping the extent to which these target each of the relevant urban infrastructure regime structures underpinning barriers to urban NBS mainstreaming. We demonstrate that, with the exception of the EU, none of the studied cases employs a fully comprehensive policy mix. We conclude that by strategically adopting policy instruments with the aim of crafting a comprehensive policy mix, obstacles in pathways to urban NBS mainstreaming could be overcome

Can the EU taxonomy for sustainable activities help upscale investments into urban nature-based solutions?

We analyze the potential of the European Union (EU) Taxonomy (ET) for Sustainable Activities to mobilize investments for the sustainability transition toward urban nature-based solutions (UNBS). We map the current investment landscape of UNBS in Europe and combine this mapping with document analysis of UNBS inclusion in the ET to understand how the ET might help overcome the well-documented barriers to UNBS finance. We suggest that the ET has a legitimizing effect on UNBS as climate investments, which can support their uptake, but also conclude that only some UNBS subtypes are explicitly included when they fit with existing investment classes. In particular, the ET (1) disregards innovative - and specifically urban - UNBS types and (2) fails to provide incentives for investments that can deliver multiple sustainable objectives, which would enhance the investment case for UNBS. Since the current investment landscape of UNBS is characterized by a strong presence of public actors and a high incidence of co-financing, we recommend that public actors leverage the ET to obtain private funding for UNBS via (green) bond issuance and public-private co-finance instruments. Our analysis indicates that the ability of the ET to upscale investments for specific sustainability transitions depends on the interplay among their current investment landscapes, specific financing barriers, and explicit inclusion in the ET

State of the art and latest advances in exploring business models for nature-based solutions

Nature-based solutions (NBS) offer multiple solutions to urban challenges simultaneously, but realising funding for NBS remains a challenge. When the concept of NBS for societal challenges was first defined by the EC in 2017, financing was recognised as one of the major challenges to its mainstreaming. The complexity of NBS finance has its origin in the multiple benefits/stakeholders involved, which obscures the argument for both public and private sector investment. Since 2017, subsequent waves of EU research-and innovation-funded projects have substantially contributed to the knowledge base of funding and business models for NBS, particularly in the urban context. Collaborating and sharing knowledge through an EU Task Force, this first set of EU projects laid important knowledge foundations, reviewing existing literature, and compiling empirical evidence of different financing approaches and the business models that underpinned them. The second set of EU innovation actions advanced this knowledge base, developing and testing new implementation models, business model tools, and approaches. This paper presents the findings of these projects from a business model perspective to improve our understanding of the value propositions of NBS to support their mainstreaming

Reviewing financing barriers and strategies for urban nature-based solutions

Obtaining public and/or private finance for upscaling urban nature-based solutions (NBS) is a key barrier for reaching urban sustainability goals, including climate mitigation and adaptation. We carry out a systematic review of the academic literature to understand the key barriers and corresponding strategies for financing urban NBS. First, we report on specific financing challenges and strategies found for NBS uptake in four urban ecological domains: buildings, facades and roofs; urban green space (parks, trees); allotment gardens (including urban agriculture); and green-blue infrastructure. Across domains, we identify two overarching barriers of NBS finance: (1) coordination between private and public financiers and (2) integration of NBS benefits into valuation and accounting methods. We discuss strategies found in the literature that address these barriers; here, two things stand out. One, there is a large variety of valuation strategies that does not yet allow for an integrated accounting and valuation framework for NBS. Two, strategies aimed at coordinating public/private finance generally look for ways to encourage specific actors (real estate developers, residents) that benefit privately from an NBS to provide co-financing. We visualize our findings into a framework for enabling (public and/or private) finance for upscaling urban NBS