Guest editorial: Finance and new energy development

As the world continues to shift towards renewable and sustainable energy, the role of finance becomes increasingly critical in enabling the growth and advancement of new energy technologies and solutions. Many countries throughout the world have made significant progress in developing new energy sources as part of their commitment to reducing carbon emissions and combating climate change. A large number of renewable energy projects, such as wind and solar power, hydropower and biomass, have been heavily invested in recent years. With continued financial support, the acceleration of its new energy development and a vigorous future of sustainability will soon be expected.

In this context, researchers have begun to explore the crucial role of finance in new energy development. Best (2017) shows that in high-income countries, financial capital facilitates transitions from fossil fuels to modern renewable energy sources, particularly wind energy. Steffen (2018) finds that project finance has much larger importance for renewables than for fossil fuel-based power plants. Wang et al. (2022) document that for renewable energy transition, R&D investments supported by green financing are critically important. Research findings of Lee et al. (2024) show that green finance directly promotes the development of a new energy system. Moreover, it indirectly supports this development by driving advancements in technological innovation and facilitating the establishment of additional environmental protection institutions.

Overall, finance plays a crucial role in driving the development, investment and scalability of new energy solutions. It provides the necessary capital for research and implementation of renewable energy projects. Through financial instruments such as clean energy stocks (CES) and green bonds, financial individuals and institutions engage in mitigating the environmental and climate impact of traditional energy sources. Further analysis of the relationship between finance and new energy development is crucial for facilitating the transition to a more sustainable energy future. To this end, we have specially organized a special issue titled “Finance and new energy development” to explore the relationship between the two, as well as broader research topics in this area.

We receive numerous submissions in response to our call for papers, reflecting a growing interest in the role of finance in new energy development. After a rigorous peer-review process, eight papers are selected for publication in this special issue. The authors come from China, the United States, the United Kingdom, France, Singapore, Australia, Norway, Vietnam, Lebanon and Romania. These papers contribute to the understanding of the relationship between finance and new energy and make valuable contributions in the following areas.

The first group of papers explores the interactions between finance and new energy. From the perspective of risk spillovers, Dai and Zhu (2025) investigate the interconnectedness between the financial sectors and new energy companies in China and analyze the static and time-varying characteristics of the multilayer network at system and company levels, respectively. They employ the multilayer network containing the realized volatility layer, the realized skewness layer and the realized kurtosis layer. The results show that different layers have different characteristics and can provide supplementary information. Banks tend to play the role of risk transmitters on the whole, while the insurance and new energy companies tend to play the role of risk receivers on average. The connectedness strength of financial sectors and new energy companies varies over time, and climbs sharply during major crisis events. The roles of financial sectors and new energy companies may change from risk transmitters to risk receivers, and vice versa.

From the perspective of return predictability, Liu et al. (2025) forecast CES returns using many predictors, including technical, macroeconomic, climate risk and financial predictors. This study establishes a robust forecasting framework using monthly data from the WilderHill Clean Energy Index. To address multicollinearity and identify key drivers, the framework applies advanced shrinkage methods, regularization, quantile regression and model combination. This paper identifies macroeconomic predictors as the most stable and powerful drivers of CES returns; the Chicago Fed National Activity Index is a particularly important indicator. Climate predictors show temporal variability, while technical and financial predictors are more important during market volatility.

From the perspective of convergence relationships, Nguyen et al. (2025) examine the convergence of energy diversification, financial development and per-capita income in OECD countries. This paper employs the club convergence test to assess convergence among OECD countries and uses Granger causality tests and panel regressions to identify the determinants of convergence. The convergence tests show no overall convergence but reveal convergence clubs for each factor. Granger causality tests indicate short-run bi-directional relationships between the variables. Long-run panel regression analysis confirms that technological progress significantly improves per capita income and energy diversification.

The second group of papers focuses on sustainable investment and financing. On the one hand, from the perspective of sustainable financing, Mirza et al. (2025) examine the impact of ESG lending and technology-related capital expenditures on banking performance in BRICS economies. They employ fixed-effects regression models to estimate the effects and use quarterly panel data from commercial banks in Brazil, Russia, India, China and South Africa. The results indicate that greater exposure to high-ESG firms enhances banking performance by improving return on risk-weighted assets and reducing non-performing loans. Similarly, borrowers investing in technology exhibit more substantial financial stability, leading to lower credit risk for banks. The effects are more pronounced in smaller banks, suggesting that sustainable and technology-driven lending strategies provide greater risk mitigation benefits for institutions with resource constraints.

On the other hand, from the perspective of sustainable investment, Zhang et al. (2025) examine whether corporate green investment intentions are inhibited by the online concerns of retail investors. Machine learning methods are used to construct text word frequency indicators representing corporate green investment intentions, and a panel regression model is employed to conduct the empirical analysis. This paper finds that retail investor concerns shown on online social platforms significantly inhibit corporate green investment intentions. The inhibition effect comes from the investment stages of source prevention and process control, while a promotion effect is identified at the stage of end-pipe treatment. Furthermore, the inhibition effect is smaller for companies with improved credibility of information disclosure.

The third group of papers examines the relationship between finance and carbon emissions. From the perspective of investor behavior, Li and Zhao (2025) examine investor behavior toward green stocks through the lens of return co-movement. They use machine learning methodologies to augment the carbon emissions sample and empirically test the hypothesis that the stock returns of firms with similar carbon dioxide emissions levels move together. The findings indicate that stocks with similar carbon emissions exhibit higher co-movement in stock returns in both the baseline sample and the augmented data sample, and the co-movement has increased in the 2012–2020 period compared to the 2004–2011 years, suggesting that green investment has gained traction over time.

From the perspective of digital finance, Lv et al. (2025) investigate the causal relationship and mechanisms between the development of digital finance and household carbon emissions. Based on a fixed effects model, they find that digital finance significantly lowers household carbon emissions. Further investigation shows that digital transformation, consumption structure upgrades and improved household financial literacy enhance the restraining effect of digital finance on carbon emissions. Heterogeneity analysis indicates that this mitigating effect is more pronounced in households during the nurturing phase, those using convenient payment methods, small-scale, and urban households. Sub-index tests suggest that the broadening coverage and deepening usage of digital finance primarily drive its impact on reducing household carbon emissions.

From the perspective of the cost of equity, Xu et al. (2025) employ a difference-in-differences (DID) approach to systematically analyze the impact of emission trading systems (ETS) pilots on the cost of equity for high-carbon firms. ETS’s phased and orderly implementation provides an excellent quasi-natural experiment for formulating a DID model. This paper finds that the implementation of the ETS significantly increases high-carbon firms’ cost of equity. Investors request more compensation for the increased stock return volatility, reduced operating cash flows, and heightened distress risks following ETS. The effect is more pronounced for firms with severe financing constraints, while it is alleviated in state-owned enterprises and firms with higher institutional ownership.

In advancing research on finance and new energy development, the categories outlined above provide a valuable starting point. However, the eight papers featured in this special issue cannot fully encompass the broad and evolving scope of this interdisciplinary field. We believe that researchers can further explore the relationship between finance and new energy from several additional perspectives.

First, innovation in financial instruments and market mechanisms. (1) Enhancing the liquidity of securitized renewable energy assets. This includes exploring securitization pathways for small-scale assets such as distributed photovoltaics and energy storage stations to reduce financing costs. (2) Risk pricing of carbon-related financial derivatives. Developing and optimizing pricing models and hedging strategies for instruments such as carbon allowances, carbon futures and carbon options in volatile market environments.

Second, systemic risk management and resilience building. (1) Management of stranded assets in the energy transition. This involves early-warning systems and resolution mechanisms for financial risks triggered by the premature retirement of fossil fuel infrastructure. (2) Modeling the impact of physical climate risks on energy assets. Assessing how extreme weather events affect the stability of wind and solar power stations and grid infrastructure, as well as designing corresponding insurance derivatives. (3) The coupling between geopolitics and energy finance security. This includes analyzing financial mechanisms within critical mineral supply chains, energy-related sanctions and strategies for enhancing the autonomy of renewable energy systems.

Third, dynamic coordination between policy and market design. (1) Monetary policy alignment with the energy transition. Evaluating how tools such as green quantitative easing and carbon-adjusted interest rates influence the financing costs of new energy projects. (2) Financial transmission effects of the Carbon Border Adjustment Mechanism (CBAM). Investigating how carbon tariffs reshape global industrial supply chains and affect financing demands for renewable energy projects in emerging markets.

We believe that greater engagement from scholars in these issues and other related areas will undoubtedly enhance the understanding of the relationship between finance and new energy development in both academia and industry, thereby promoting the advancement of new energy development.