Sustainable finance: A new paradigm ☆ Ali M. Fatemi a, ⁎, Iraj J. Fooladi b a Department of Finance, Driehaus College of Business, DePaul University, 1 East Jackson Blvd., Chicago, IL 60604, United States b Douglas C. Mackay Chair in Finance, School of Business Administration, Dalhousie University, Halifax, NS, B3H 3J5, Canada article info abstract Available online 16 July 2013 We argue that our current approach to shareholder wealth maximization is no longer a valid guide to creation of sustainable wealth: An emphasis on short-term results has had the unintended consequence of forcing many firms to externalize their social and environmental costs. An unwavering faith in markets' ability to efficiently uncover long-term value implications of short-term results has created many unacceptable outcomes. Given the social and environmental challenges ahead, such practices and their unacceptable outcomes cannot be sustained. Therefore, a shift in paradigm is called for. We propose a sustainable value creation framework, within which all social and environmental costs and benefits are to be explicitly accounted for. © 2013 Elsevier Inc. All rights reserved. JEL Classification: G32 G39 Keywords: Sustainable finance Value creation Corporate social responsibility 1. Introduction This paper was first delivered at the 2011 meetings of Global Finance Conference, April 5–7 in Bangkok, Thailand. The April 2, 2011 edition of Bangkok Post, like other local papers, was filled with reports of the flooding that had brought death and devastation to many areas of Thailand, and the Krabi area in particular. Its front page prominently displayed a quote from Samran Thetkit, a Krabi resident: “we have harmed nature, so nature has taken revenge.” The emphatic tone of this Krabi resident was, perhaps, one of the most remarkable features of the article reporting on the devastating floods hitting the region. Two days later, the same paper laid out the cause and effect relationship that Mr. Thetkit had in mind. In that issue, Thawil Suwanwong, a former Thai agricultural official, blamed illegal logging for Thailand's 2011 flooding. Mr. Suwanwong was further quoted as laying the blame squarely at the doors of the Thai government, criticizing its policies in “promoting the planting of rubber and palm trees by boosting their prices”. In essence, government's actions were held responsible for the deforestation that ultimately led to the flooding disasters of Thailand in 2011. Half a dozen years earlier, on a different continent and in the aftermath of Hurricane Katrina, government inaction was blamed for the extent of damage caused by that storm. Long before Katrina hit the Gulf Coast of Global Finance Journal 24 (2013) 101–113 ☆ The helpful comments of participants at the 2011 meetings of Global Finance Conference are acknowledged and appreciated. ⁎ Tel.: +1 312 362 8826; fax: +1 312 362 6566. 1044-0283/$ – see front matter © 2013 Elsevier Inc. All rights reserved. http://dx.doi.org/10.1016/j.gfj.2013.07.006 Contents lists available at ScienceDirect Global Finance Journal journal homepage: www.elsevier.com/locate/gfj