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Why is 2023 a key year for Sustainable Finance?

Entering 2023 means recasting the year before while thinking ahead. So in this short article we are exploring 3 likely trends for the incoming year, as an attempt to forecast what this year will bring about for Sustainable Finance. We do this exercise having read the most important credit institutions annual outlooks for the incoming year.

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The “End of ESG”

So, the first topic to explore is about theory. Or rather, about the theoretical application of a well-known term: the ESG (i.e. Environmental Social and Governance) acronym. A first set of insights are coming from a “provocative” heading of the academic Alex Edmans latest article “the end of ESG” [1]. Edmans claims this title fits in because it clearly postulates that the ESG has become mainstream. Something we see as a long-take, also because Edmans says that what makes long-term value is as key as much as factors contributing to short-term value and financial alpha. Moreover, he adds that for this reason investors can have very diverging opinions on companies’ sustainability performance the same way ESG scoring vary so much – as another cutting-edge academic research this year had shown. [2]

A shade of blue for Sustainable Finance

Names apart, data shows that Sustainable investment is bound to grow up again in 2023. When it comes to sustainable debt issuance, we agree with Morgan Stanley, whose forecasts speculate that blue bonds are bound to get over green bonds in a few months [3]. Blue bonds are debt instruments, whose use of proceeds are financing the Ocean preservation. Their aggregated volume is currently around 3 trillion USD and the majority of issuers are sovereign nations rather than companies [4] and this gives them an alleged long-term demand. Other innovative financial products to be entering the market are insurance products covering the EU Taxonomy transitional and physical risks. [5] Considering the volume of ESG investment inflows data, in 2022 Europe saw ESG-aligned ETFs (i.e. exchange traded funds) accounted for 65% of all net inflows into European ETFs in 2022, despite ESG strategies underperformed. [6] We do not see any reason why this trend could be interrupted this year.

Environmental, Social and Geopolitical Governance

2023 has started with a conflict at the boundaries of Europe: the invasion of the Ukrainian territory by the Russian Federation. Its geopolitical effects impacted on world order [7], gas prices [8] and global supply chains [9] not to mention the global supply shock of raw materials, whose Donbass region takeover by Russia was the utmost protagonist [10]. Similarly, China’s Zero Covid policy has seriously reflected production’ costs spike [11]. All things considered, we can conclude that in 2023 for companies, investors and institutions the ESG acronym meant better Environmental, Social and Geopolitical Governance rather than Environmental Social Governance: a turning point we foresee as well this year.

By Manfredi Morello


[1] Edmans, Alex, The End of ESG (January 4, 2023). Financial Management, forthcoming, Available at SSRN: or

[2] Berg, Florian and Kölbel, Julian and Rigobon, Roberto, Aggregate Confusion: The Divergence of ESG Ratings (August 15, 2019). Forthcoming Review of Finance, Available at SSRN: or

[3] Bloomberg (2021) Why the Hot New Shade for Green Bonds Could Be Blue. URL:

[3] Morgan Stanley Institute for Sustainable Investment (2022) Blue Bonds: The Next Wave of Sustainable Bonds. URL:

[4] United Nations Global Compact (2022) “Blue Bonds: accelerating Sustainable Ocean”. URL:

[5] United Nations CILRIF - Climate insurance linked infrastructure finance (2022) “CILRIF Sub-Working Group Session 2: Climate Modeling - Challenges & Opportunities”. URL:

[6] FT “Moral Money” (2023) “ESG accounts for 65% of all flows into European ETFs in 2022”. 13th January 2023. URL:

[7] Morello M. (2022) “The European Defence Consortium and the renewed plan for Energy Policy: an opportunity for the EU”. URL:

[8] Deutsche Bank – Chief Investment Office (2022) “CIO Insights 2022”. URL:

[9] BBVA Research (2022) “Global Economic Outlook”. URL:

[10] Wells Fargo (2022) “2023 Outlook Recession, recovery, and rebound”. URL:

[11] ING - THINK Economic and Financial Analysis (2022) “ING Macro Outlook 2023”. URL: