The role of ESG-related derivatives in the green transition of capital markets

Abstract

This study aims to examine the potential contribution of ESG-related derivatives to the green transition of capital markets. We conducted a systematic literature review using the Scopus database, complemented by keyword and co-occurrence analysis with VOSviewer, to map the theoretical structures of sustainable and green finance and to identify key areas where ESG-related derivatives can play a pivotal role. Our findings suggest that these instruments can support the green transition by promoting green and financial innovation, mitigating risks associated with natural resources and renewable energy transition, and facilitating green investments and emissions trading. As policymakers revisit the role of derivatives in sustainability reporting for financial market participants, the importance of ESG-related derivative markets is expected to grow significantly in the near future.