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Environmental, social, and governance (ESG) funds are among the fastest‐growing investment styles. ESG investing thereby has a governing effect, and a key open question is whether ESG merely reduces risks for investors or whether it can have a sustainability impact and actively contribute to climate transition. This governance through ESG is characterized by three potential transmission mechanisms: ratings, shareholder engagement, and capital allocation. These can create sustainability impact or constitute "ESG gaps" if transmission mechanisms remain ineffective/unutilized. Based on financial data, an investigation of ESG methodologies and expert interviews, we provide a novel ESG market analysis, focusing on the standard‐setting role of a handful of ESG index providers in capital allocation. Our findings highlight that while "Dark Green" indices could have an impact, currently "Broad ESG" indices, which do not meaningfully facilitate sustainability, dominate investing: we call this the "ESG capital allocation gap." This has important implications, because effective transmission mechanisms are crucial for ESG funds to achieve sustainability impact in the real economy. [ABSTRACT FROM AUTHOR]

Recent IPE scholarship locates the key dynamics of financial globalization in two areas: public money flows between the US and Asia, or private banking flows between the US and Europe. This dichotomy presents the globalization of private finance as firmly anchored within transatlantic, neoliberal financial norms. We argue that this creates a blind spot regarding the growing role of East Asian finance within the global financial system. Combining CPE insights on institutional characteristics of Asian financial systems with a macro-financial analysis of the global financial system, this paper analyzes the global implications of the geographic shift towards East Asia. First, we demonstrate the growing importance of East Asia for global macro-financial flows, actors and markets that goes beyond the rise of China. Second, we explore how the institutional arrangements that underpin Asian financial systems differ significantly from transatlantic finance. By investigating the growing importance of global investors in Asian markets and Asian investors in global markets, we explore how the shift towards East Asia introduces a growing role of developmental characteristics within global finance. This calls for a reconsideration of conventional analyses of the global financial system which often assume its role as a force of neoliberal globalization. [ABSTRACT FROM AUTHOR]

The geopolitical rise of emerging economies has led to contestations and renegotiations of the boundaries of the developing country status. Established powers put pressure on emerging economies to give up this status and the benefits it comes with in global regimes. In this article, we analyse the (re)negotiation of China's developing country status within the context of US–China geoeconomic competition with respect to two core areas in the global economy—finance and trade. We show that whether private or public actors are responsible for status classification influences the outcomes of contestation over China's status. When private sector actors are central, China is more likely able to defend its developing country status against US pressure. We also find that these processes are mitigated by how decision-making processes are institutionalised. Our two case studies thus illustrate that regulatory processes such as status classification influence the outcomes of geoeconomic competition in international politics. These findings also shed new light on the power of states versus non-state actors within global governance amidst the geoeconomic turn: the public–private divide can serve as an important context factor that influences the probability of the international economic order to cater more towards US or Chinese geoeconomic strategies. [ABSTRACT FROM AUTHOR]

Scholars have focused on how the Belt and Road Initiative (BRI) facilitates Chinese economic statecraft and its likely impact on the global order. A common thread thereby is how connectivity through China's construction of physical infrastructures (e.g. ports, roads, railways) represents a source of power. However, such a focus on physical infrastructures obscures the importance of BRI-related financial infrastructures. Addressing this gap, this article analyses the construction of Chinese financial infrastructures along the BRI as an exercise of economic statecraft within the context of the liberal, US-dominated global financial order. The article traces the activities of China's state-owned exchanges as crucial actors that facilitate financial connectivity by enabling investment into BRI projects (investment opportunities), bringing Chinese investors into BRI markets (investors structure) and gradually shaping how these markets work (investment rules). First, I analyse three individual countries (Pakistan, Kazakhstan and Bangladesh) as examples of 'bilateral' and 'offensive' statecraft. Second, I analyse an emerging China-centred global network of financial infrastructures as exercise of 'systemic' and 'defensive' statecraft that shields China's foreign policy objectives (i.e. BRI) from global pressures, potentially creating a parallel system of capital markets with Chinese characteristics. Beyond BRI, I therefore argue for including financial infrastructures more thoroughly into International Relations (IR)/International Political Economy (IPE) scholarship as important object of analysis. [ABSTRACT FROM AUTHOR]

Finance plays a major role in discussions about state capitalism in emerging markets, but the focus has so far been on banks. Capital markets have been neglected. Moreover, findings from the growing literature on financialization in emerging markets indicate that in some cases there is increasing state involvement in the development and functioning of capital markets. Hence, the relationship between the state and finance in these economies may be fundamentally different from the picture provided by liberal Western-centric perspectives. Instead of looking at capital markets as uniform entities, we propose to analyse them as variegated – while characterized by common financialization processes, they can be informed by different institutional logics, leading to very different market dynamics and outcomes. We explore to what extent these differences exist and how state-capitalist economies facilitate capital market development. Our comparative institutional analysis of securities exchanges as central parts of capital markets in six increasingly financialized emerging market economies – Brazil, China, India, Russia, South Africa and South Korea – focuses on the degree to which capital markets are integrated into state-capitalist institutions. Instead of mere platforms on which market transactions take place, we analyse exchanges as powerful actors which actively shape capital markets. While in most advanced economies exchanges are situated within an institutional setting informed by neoliberal institutional logic, we demonstrate that exchanges in emerging markets often organize capital markets to facilitate state objectives. [ABSTRACT FROM AUTHOR]

Since 2009, China's capital markets have developed and internationalized to an unprecedented degree, which has contributed to a lot of debates on China's rise and its implications for the global financial order. Contributing to these debates, this article analyses the development of capital markets in China and their integration into global finance between 2009 and 2019, focusing on three aspects: how Chinese capital markets are developing domestically; how they are integrating with global markets; and how Chinese capital markets are internationalizing, i.e. expanding abroad. Thereby, the article analyses the crucial role of securities exchanges who as organizers of capital markets are powerful actors that exercise considerable influence over these markets and their development. This empirical investigation reveals that while they share some characteristics with 'global' capital markets, Chinese capital markets function quite differently. The article argues that China's state-owned exchanges facilitate the development of state-capitalist capital markets – capital markets that follow an institutional logic derived from China's state-capitalist economic system. Rather than giving in to a neoliberal rulebook, China's capital markets represent an alternative to, resist and challenge the norms, principles and procedures of the contemporary global financial order. While different capital markets share some characteristics, they are institutionally embedded, and these institutional settings facilitate different institutional logics that underpin and inform the functioning of markets. Instead of viewing capital markets as homogeneous entities, the article therefore proposes to investigate a 'varieties of capital markets' that are shaped by different institutional logics. [ABSTRACT FROM AUTHOR]

This paper analyses the role of (stock and derivative) exchanges as powerful actors in global finance. While most IPE accounts of exchanges analyse 'exchanges as marketplaces' and focus on equity market trading, they miss how exchanges have fundamentally transformed in the last 25 years. Through marketisation, internationalisation and digitisation, the business model of exchanges has fundamentally changed and led to the emergence of global exchange groups that dominate the exchange industry (CME, ICE, LSE, Cboe, Nasdaq and Deutsche Börse). Thereby, exchanges transformed from national marketplaces to global providers of financial infrastructures. They control the infrastructures that enable the functioning of capital markets: from market data, indices, financial products, trading platforms to post-trading activities such as clearing, exchanges create the rules according to which market transactions take place. This provision of financial infrastructures enables them to shape capital markets and represents a source of structural power, as exchanges potentially influence the actions of companies, investors and states entangled with these infrastructures. By shedding light on exchanges and their changed role and activities within capital markets, this paper makes a case for including exchanges as powerful actors into IPE analyses of global finance and for more closely analysing the structural power of (financial) infrastructure providers in the global economy. [ABSTRACT FROM AUTHOR]

Since the global financial crisis, there is a massive shift of assets towards index funds. Rather than picking stocks, index funds replicate stock indices such as the S&P 500. But where do these indices actually come from? This paper analyzes the politico-economic role of index providers, a small group of highly profitable firms including MSCI, S&P DJI, and FTSE Russell, and develops a research agenda from an IPE perspective. We argue that these index providers have become actors that exercise growing private authority as they steer investments through the indices they create and maintain. While technical expertise is a precondition, their brand is the primary source of index provider authority, which is entrenched through network externalities. Rather than a purely technical exercise, constructing indices is inherently political. Which companies or countries are included into an index or excluded (i.e. receive investment in- or outflows) is based on criteria defined by index providers, thereby setting standards for corporate governance and investor access. Hence, in this new age of passive asset management index providers are becoming gatekeepers that exert de facto regulatory power and thus may have important effects on corporate governance and the economic policies of countries. [ABSTRACT FROM AUTHOR]