Sustainable Finance and the Role of Corporate Governance in Preventing Economic Crimes

Abstract

Despite the growing popularity of sustainable finance and the emergence of an industry dedicated to solving urgent global problems while making profits, highprofile corporate governance failures do not appear to slow down. In 2018, Abraaj, a well-known figure in impact investing, collapsed after its CEO was arrested for fraud and misappropriation of funds. Similarly, in 2020, Boohoo, a previously reputable online fashion retailer, faced intense scrutiny over work slavery that ended up being the subject of a UK parliament inquiry and lost support from responsible investors. This chapter proposes to go back to these two recent high-profile cases to discuss the extent to which the lack of accountability, ethics, and corporate governance might be conducive to economic crimes and detrimental to investors willing to embrace the principles of sustainable finance. Then, the concept of sustainable corporate governance is introduced, and a discussion of its implications for the fields of corporate governance and criminology is provided. Finally, two incentive alignment mechanisms promoting sustainable corporate governance, CSR committees and CSR contracting, are presented to help align executives’ interests with those of all legitimate stakeholders. This chapter contributes to the literature on corporate governance and criminology by examining the role of a more sustainable governance in preventing and deterring economic crimes.