Why Investments in Renewable Energy Might Have a Minsky Moment? Learning Lessons from Recent Financial Crises (Dotcom and Subprime)

Financial crises, akin to extreme environmental events, are sudden and unpredictable occurrences with far-reaching consequences. Despite their historical recurrence and extensive analysis post-crisis, understanding and predicting them ex-ante remains challenging. This paper examines the realm of financial crises, specifically focusing on their intersection with sustainable finance. Drawing from historical examples and theoretical frameworks, including Hyman Minsky's seminal contributions, it explores the potential vulnerabilities within sustainable finance, particularly in renewable energy investments. By analyzing past crises, the Dotcom and Subprime crises, and their parallels to current market trends, the research identifies warning signals and red flags that may indicate the emergence of a 'Minsky Moment' in sustainable investments. Through this investigation, the paper aims to raise awareness among stakeholders about the risks associated with the growing enthusiasm for sustainability in financial markets. It underscores the importance of proactive measures and vigilant monitoring to mitigate the possibility of a financial debacle within sustainable finance, emphasizing the need for a balanced approach that considers both the positive aspects of sustainability and the potential risks it poses to financial stability. Ultimately, the paper advocates for informed decision-making and collective action to safeguard against future crises and uphold sustainable development goals.