What we do

LINKS is an ERC funded project (Sep 2019 – Aug 2024) focusing on the role of the financial system to boost the low-carbon transition hosted at UCL Institute for Sustainable Resources.

The financial system is increasingly built on investors’ interdependencies and interconnections that are hard to predict at the aggregate level. When it comes to low-carbon assets, this interconnectedness between investors remains unexplored as climate policy analysis takes the existing structure of financial systems as given.

‘Shifting the trillions’ to close the climate investment gap will require to exploit investors’ interactions and dynamics as their collective dynamics shape the actual flows in low-carbon technologies and drive the direction of technical change. The evolution of inter-connected structures will determine how the system could pool long-term financial assets to boost the low-carbon transition; how policy can seek to take advantages of non-linearity and tipping points in the system by influencing key actors and connections; and will determine the main winners and losers within the financial system itself.

This programme explores the market structures for low-carbon finance and the key features of the analysis are:

  • model network structures of low-carbon investments and investors’ preferences in the complex architecture of current financial system;
  • explore networks evolution and their dynamics to understand and shape the development of the climate finance system; and,
  • identify effective policies and regulations to channel funds towards low-carbon investment and to optimally allocate public resources based on a range of network configurations.

How we do

LINKS will use network theory, advanced computational techniques and extensive empirical data to model the financial system as a complex adaptive system. It will incorporate the heterogeneity of investors’ preferences, their influence in the financial system, interactions and dynamics, and the effect of different policies on low-carbon investments.

The goal of this study is to show how micro investors’ behaviour and interactions give rise to large scale investment trends. Employing network analysis on long-term investment data allows us to determine the structure and growth of the investment system based on the dynamism of its investors’ behaviour, their influence in the system and investment trends.

This analysis advances the nascent literature exploring the role of the financial sector in the global transition to a low-carbon economy by accounting for complexity thinking and systemic perspective.