Economics, Law, and Institutions in Asia Pacific Farhad Taghizadeh-Hesary Suk Hyun   Editors Green Digital Finance and Sustainable Development Goals Economics, Law, and Institutions in Asia Pacific SeriesEditor MakotoYano,ResearchInstituteofEconomy,TradeandIndustry(RIETI),Tokyo, Japan EditorialBoard ReikoAoki,JapanFairTradeCommission,Tokyo,Japan YoungsubChun,DepartmentofEconomics,SeoulNationalUniversity,Seoul, Korea(Republicof) AvinashKDixit,DepartmentofEconomics,PrincetonUniversity,Princeton,NJ, USA MasahisaFujita,InstituteofEconomicResearch,KyotoUniversity,Kyoto,Japan TakashiKamihigashi,RIEB,KobeUniversity,Kobe,Hyogo,Japan MasahiroKawai,GraduateSchoolofPublicPolicy,UniversityofTokyo,Tokyo, Japan Chang-FaLo,WTO,Geneva,Switzerland MitsuoMatsushita,NagashimaOhnoandTsunematsu,Tokyo,Tokyo,Japan KazuoNishimura,RIEB,KobeUniversity,Kobe,Hyogo,Japan ShiroYabushita,OrgforJapan-USStudies,WasedaUniversity,Tokyo,Japan NaoyukiYoshino,KeioUniversity,Tokyo,Japan FuhitoKojima,GraduateSchoolofEconomics,UniversityofTokyo,Tokyo,Japan The Asia Pacific region is expected to steadily enhance its economic and political presence in the world during the twenty-first century. At the same time, many serious economic and political issues remain unresolved in the region. To further academicenquiryandenhancereaders’understandingaboutthisvibrantregion,the present series, Economics, Law, and Institutions in Asia Pacific, aims to present cutting-edge research on the Asia Pacific region and its relationship with the rest oftheworld.Forcountriesinthisregiontoachieverobusteconomicgrowth,itisof foremost importance that they improve the quality of their markets, as history shows that healthy economic growth cannot be achieved without high-quality markets. High-quality markets can be established and maintained only under a well-designed set of rules and laws, without which competition will not flourish. Basedontheseprinciples,thisseriesplacesaspecialfocusoneconomic,business, legal, and institutional issues geared towards the healthy development of Asia Pacific markets. The series considers book proposals for scientific research, either theoreticalorempirical,thatisrelatedtothethemeofimprovingmarketqualityand haspolicyimplicationsfortheAsiaPacificregion.Thetypesofbooksthatwillbe considered for publication include research monographs as well as relevant proceedings.Theseriesshow-casesworkbyAsia-Pacificbasedresearchersbutalso encouragestheworkofsocialscientistsnotlimitedtotheAsiaPacificregion.Each proposal and final manuscript is subject to evaluation by the editorial board and expertsinthefield. All books and chapters in the Economics, Law and Institutions in Asia Pacific bookseriesareindexedinScopus. Moreinformationaboutthisseriesathttps://link.springer.com/bookseries/13451 · Farhad Taghizadeh-Hesary Suk Hyun Editors Green Digital Finance and Sustainable Development Goals Editors FarhadTaghizadeh-Hesary SukHyun SchoolofGlobalStudies GraduateSchoolofEnvironmentalFinance TokaiUniversity YonseiUniversity Hiratsuka,Kanagawa,Japan Wonju,Korea(Republicof) TOKAIResearchInstituteforEnvironment andSustainability(TRIES) TokaiUniversity Hiratsuka,Kanagawa,Japan ISSN 2199-8620 ISSN 2199-8639 (electronic) Economics,Law,andInstitutionsinAsiaPacific ISBN 978-981-19-2661-7 ISBN 978-981-19-2662-4 (eBook) https://doi.org/10.1007/978-981-19-2662-4 ©TheEditor(s)(ifapplicable)andTheAuthor(s),underexclusivelicensetoSpringerNature SingaporePteLtd.2022 Thisworkissubjecttocopyright.AllrightsaresolelyandexclusivelylicensedbythePublisher,whether thewholeorpartofthematerialisconcerned,specificallytherightsoftranslation,reprinting,reuse ofillustrations,recitation,broadcasting,reproductiononmicrofilmsorinanyotherphysicalway,and transmissionorinformationstorageandretrieval,electronicadaptation,computersoftware,orbysimilar ordissimilarmethodologynowknownorhereafterdeveloped. Theuseofgeneraldescriptivenames,registerednames,trademarks,servicemarks,etc.inthispublication doesnotimply,evenintheabsenceofaspecificstatement,thatsuchnamesareexemptfromtherelevant protectivelawsandregulationsandthereforefreeforgeneraluse. Thepublisher,theauthors,andtheeditorsaresafetoassumethattheadviceandinformationinthisbook arebelievedtobetrueandaccurateatthedateofpublication.Neitherthepublishernortheauthorsor theeditorsgiveawarranty,expressedorimplied,withrespecttothematerialcontainedhereinorforany errorsoromissionsthatmayhavebeenmade.Thepublisherremainsneutralwithregardtojurisdictional claimsinpublishedmapsandinstitutionalaffiliations. ThisSpringerimprintispublishedbytheregisteredcompanySpringerNatureSingaporePteLtd. The registered company address is: 152 Beach Road, #21-01/04 Gateway East, Singapore 189721, Singapore Acknowledgments WearegratefultotheGraduateSchoolofEnvironmentalFinanceofYonseiUniver- sityand the Ministryof Environment of the Republic of Korea for supporting this bookproject.WealsothankProfessorNaoyukiYoshinoandalltheparticipantsof theworkshoptitledGreenDigitalFinanceforAchievingSustainableDevelopment GoalshostedbyTokaiUniversityandYonseiUniversity(June30–31,2021)fortheir commentsonthepresentedpapers.WealsothankMs.JunoKawakamiofSpringer Nature for her help in publishing this book. We are exceedingly grateful to all the contributorstothisbook.Withouttheirvaluablecontributions,wewouldnothave beenabletofinalizethisbook. v Introduction GreenDigital FinanceandSustainableDevelopmentGoals TomeetobligationsundertheParisAgreementandachievethesustainabledevelop- mentgoals(SDGs),significantinvestmentsinrenewableenergygenerationandgreen infrastructure are necessary worldwide. An estimated US $5–7 trillion of annual investment will be needed to deliver on UN SDGs and the Paris Agreement on ClimateChange(KharasandMcArthur2016).However,evenbeforetheCOVID-19 pandemic,globalinvestmentinrenewablesandenergyefficiencywasnotenoughto meettheSDGs(Sachsetal.2019;IEA2020).In2020and2021,inthewakeofthe COVID-19 pandemic and the global economic recession, the ongoing investment in renewable energy and energy efficiency projects fell due to a decline in global economicgrowthandrisinginvestoruncertainty.Energyefficiencyinvestmentisnot adequatetomeetsustainabilitygoalsandreducetheeffortrequiredfromtheenergy supply(IEA2020). AsrestrictionsassociatedwiththeCOVID-19pandemicareeasingandeconomies are opening, governments are beginning to unveil their economic recovery plans. However, there is a lack of motivation to strengthen climate change adaptations andenvironmentalmanagementintherecoveryplans.Therecoveryoutlookseems to follow the approach of “growth first and green it when possible” that is typical of existing development plans. Globally, many governments seeking to stimulate economic growth in the economic recovery have rolled back environmental regu- lations and taxes, and increased fossil-fuel-intensive infrastructure and electricity. ThispracticewillendangertheParisagreementonclimatechangeandseveralSDGs (Yoshinoetal.2021). One of the main barriers that the establishment of new infrastructure is facing is difficulty in accessing finance. Although several new green financing solutions suchasgreenbonds,greenbanks,greencreditguarantees,carbontaxation,carbon trading,villagefunds,andcommunitytrustfundshavebeenestablishedindifferent countries,thecurrentgreeninvestmentgapshowsthatthesesourcesarenotsufficient, vii viii Introduction andalternativewaystofinanceprojectsarerequired(Hyunetal.2020;Taghizadeh- HesaryandYoshino2019,2020). Technological innovation is already offering sustainability solutions across the financial system’s five core functions: moving value, storing value, exchanging value,fundingvaluecreation,andmanagingvalueatrisk(UNDP2019).Increasing transparency, accountability, decentralization of the financial system, improving riskmanagement,increasingcompetition,loweringcostsandimprovingefficiency, increasingspeed,increasingcross-sectoralcollaboration,andintegrationarefeatures thatfinancialtechnology(FinTech)canprovide(UNDP2016).Artificialintelligence (AI),distributedledgertechnologies(DLT)orblockchain,peer-to-peerlendingplat- forms,bigdata,Internet-basedandmobile-basedpayments,Internetofthings(IoT), matchmaking platforms including crowdlending, and tokenizing green assets are potential means to scale-up green finance to achieve SDGs (Yoshino et al. 2020). AccordingtoUNEP(2018),AIcouldliftglobalGDPbyUS$15–20trillionby2030. Securingtheresilienceofsuchanachievement,notablyitsenvironmentalandsocial sustainability,maywellbeaccomplishedbydigitalizingfinanceor“digitalfinance.” A literature review shows a gap in utilizing digital instruments and FinTech in greenfinance.Againstthisbackground,thisbookaimstofillthisliteraturegapby providingseveralhigh-qualityempiricalreviewsandcasestudypapersonwaysto promotegreendigitalfinancetomeetSDGs. Thebookconsistsof17chaptersthatarecategorizedintothreesections. Part1coverstheprerequisitesforfacilitatinggreendigitalfinancing,consisting offourchapters. Oneofthemajorchallengesfacinggreenfinanceinitiativesisparticipationfrom theprivatesector.Thefocusofinternationalorganizationsandgovernmentsisnowto bringprivatesectorinitiativesandinvestmentintothemainstreamofgreenfinance. Integrationoftechnologyintotheseinitiativesisanappropriatetool.Alongwitha hostofbenefits,technologyalsobringsrisksandchallenges.Bankingandfinancial sectorregulatorsandsupervisorsfacethechallengeofaligningexistingregulations withdynamicchanges. InChap.1,VijayKumarSinghexplorestheregulatoryandlegalconsiderations forpromotinggreendigitalfinance.Thischapteralsofocusesonthemajorconcerns relatingto“greendigitalfinance”regulation. Due to the nascent nature of green business models, lack of data, and other relatedbarriers,greenfinanceisconsideredtooriskyandcostlybyfinancialservice providers. Digitalization can reduce the cost, and by leveraging the data, stream- line the risk assessment of green lending. In Chap. 2, Nestan Devidze explores the current state of green digital financing. The chapter assesses the persisting barriersandprovidespolicyrecommendationstoexpandthetransformativeimpact ofdigitalizationinfinancingthegreendevelopmentagendasofcountries. InChap.3,PeterJ.Morganassessestherisksassociatedwithgreendigitalfinance andcopingpolicies.Digitalfinancialtechnologies,especiallythenewgenerationof financialtechnology(FinTech),canpromotegreenfinanceandcreatenewrisksand unintendedconsequences,bothfortheenvironmentandusers,whichcanlimittheir potential to scale sustainable finance. This chapter describes risks associated with Introduction ix theenvironment,theuseofcryptoassets,alternativefinance,automatedinvestment advice,andcybercrime. InChap.4,YenerCoskunandIbrahimUnalmisinvestigatetheroleofgovernment policiestodevelopamoreeffectivegreendigitalfinanceframeworkbasedontheParis ClimateAgreementGoalsandSDGs.Theysuggestthatgovernmentpolicyactions arecriticalforsuccessfulimplementationatnationalandgloballevels.Specifically, governments can support green digital finance by implementing sound regulatory policiesandestablishingincentivesthroughgreendatainitiatives,lowertaxes,and technologicalinfrastructureinvestment. Part2focusesontherecentprogressingreendigitalfinanceinAsiaandEurope, consistingofeightchapters. In Chap. 5, Ehsan Rasoulinezhad and Farhad Taghizadeh-Hesary employ two qualitative methods: Interpretative Structural Modeling (ISM) and the Technology AcceptanceModel(TAM),toevaluatetheopinionsofadvancedexpertstodetermine thecriticalsuccessfactorsofgreendigitalfinancemarketdevelopmentinIran.The findingsshowthatamongalldistinguishedcriticalsuccessfactors,accessibilityand transparencyinthegreendigitalfinancemarket,theprofitabilityofgreenprojects, andresponsibilityofdevelopersofdigitalgreenfinancetools,easingcapitalmobility, politicalstability,andregulatoryqualityinthefieldofdigitalgreenfinancearethe mainareasthatshouldbeaddressedbyIran’spolicymakers. In Chap. 6, Dharish David, Miyana Yoshino, and Joseph Pablo Varun look at the potential of natural assets convertible to carbon credits in the Association of Southeast Asian Nations (ASEAN) region, which is vulnerable to the impacts of climatechange.ThechapterhighlightsasignificantdemandforFinTechsolutionsin thecarboncreditmarket,suchasfinancialinstrumentsandassociatedtechnological innovations,todeveloplarge-scaleregionalorvoluntarycarbonmarkets. InChap.7,SakibBinAmin,FarhadTaghizadeh-Hesary,andFarhanKhanassess how to facilitate green digital finance in Bangladesh. The chapter argues that the primary objective for the government of Bangladesh is to focus on preparing a policy framework for digitization alongside the establishment of a strong regula- tory authority for market regulation and stability. The chapter also highlights the importance of interdisciplinary research and development programs for acquiring new FinTech ideas for facilitating green digital financing in Bangladesh for green transitionandmeetingSDGs. In Chap. 8, James F. Paradise looks at the role of green digital finance in achievingSDGsinChina’sBeltandRoadInitiative(BRI).Thischapterhighlights theimportanceofmovingbeyondexhortatorystatementstowardbindingresolutions, increasing the rigorousness of environmental standards, embedding sustainability considerationsinBRIprojects,andhelpingtoincreasetheimplementationcapacity indevelopingcountries. InChap.9,AsifRumanetal.highlightthecriticalroleofFinTechmicroenterprises in the financial innovations and sustainability interlinkage using a qualitative case study from Finland. The qualitative assessment of three Finnish microenterprises showsthatFinTechcandevelopuniquetechnology-basedsustainable(green)offer- ings to microenterprises. These offerings include the possibilities for other firms x Introduction to engage with sustainability-conscious consumers, invest in sustainable firms at reasonablereturnrates,andgetridofpaperreceiptsfortransactionsusingcreditor debitcards. In Chap. 10, Sarvar Gurbanov and Farahim Suleymanli provide an analytical assessment of progress in green digital finance in the Republic of Georgia. The studyillustratestowhatextentgreenfinanceanditsdigitizationlevelareavailable in the Republic of Georgia. The major policy implication is that the country faces unintended consequences despite a robust regulatory attempt to mobilize private financial sources. This case study is relevant for many developing countries for drawinglessonsonbetterpolicymaking. InChap.11,VijetaSingh,NanditaMishra,andFarhadTaghizadeh-Hesaryhigh- lighttheinvestmentrequirementsinIndiatoachieveSDGsandoutlinethestepstaken byIndiatowardthedigitalizationofgreenfinance.Thischapteralsounderlinesthe challengesfacedbyIndiainthefieldofgreendigitalfinance.Itdrawssomeinitial recommendationsforpolicymakersinharnessinggreendigitalfinanceforachieving SDGs. InChap.12,SukHyunanalyzesthecurrentstatusandchallengesofgreendigital finance in the Republic of Korea. The Korean New Deal policy has an essential meaninginthatitsuggestsadirectionfortransitiontoadigitaleconomyandagreen economy.However,therearelimitationsasitispresentedinvariousseparateprojects undertheDigitalNewDealandtheGreenNewDeal.Thischapterhighlightsthatthe nexusbetweentheDigitalNewDealandtheGreenNewDealneedstobeexplored forsuccessfulimplementationoftheKoreanNewDealPolicy. Part 3 covers the role of FinTech and financial innovations in scaling up green digitalfinance,anditconsistsoffivechapters. In Chap. 13, Tim Schloesser and Karsten Schulz show how distributed ledger technology(DLT)canbeusedeffectivelyforinnovativeclimatefinance.Theyfirst introduce the technology and discuss its sustainability and different possible DLT governancestructures.Theyprovideanoverviewofsustainability-relatedinitiatives andnetworkslinkedtoDLT.ThischapterreviewsvariousDLTapplicationsindecen- tralizedfinance(DeFi),assetmanagement,measurement,reporting,andverification (MRV),tokenization,andotherrelevantfields.Thechapterconcludeswithanoutlook ontheroleofDLTinclimatefinanceandpresentsrecommendationsforovercoming someoftheremainingrisksandobstacles. InChap.14,MohamedA.B.M.T.Thakeretal.studythepotentialroleofFinTech anddigitalcurrencyforIslamicgreenfinancingbyprovidinganintegratedmodel. Thereisanabsenceofanintegratedmodelintheliterature,whichcouldenhancethe roleofFinTechanddigitalcurrencyinIslamicgreenfinancing.Thechapterfillsthis literaturegapinsettinganewresearchdirectionforintegratedFinTechanddigital currencymodelsthatcanfurtherenhanceandoptimizetheefficiencyofIslamicgreen financing. In Chap. 15, Keun Jung Lee and Hong Jeong provide a framework for digital- izinggreenbonds.Theyproposeablockchain-enabledgreenbondissuingplatform thatcanprovideanadaptiveandefficientsystemthatlowersintermediarycostsby reducinginformationasymmetryandfacilitatingcompliance,scalability,disclosure,