Sustainable finance for a smooth low-carbon transition

Project Information

SMOOTH

Grant agreement ID: 853050

DOI

10.3030/853050

Project closed

EC signature date 16 April 2020

Start date 1 September 2020

End date 31 August 2025

Funded under

• EXCELLENT SCIENCE - European Research Council (ERC)

Total cost

€ 1 499 956,00

EU contribution

€ 1 499 956,00

Coordinated by

ALMA MATER STUDIORUM - UNIVERSITA DI BOLOGNA
Italy

Periodic Reporting for period 4 - SMOOTH (Sustainable finance for a smooth low-carbon transition)

Reporting period: 2025-03-01 to 2025-08-31

Summary of the context and overall objectives of the project

The SMOOTH project studied the dynamic links between macro-financial systems and the transition to a low-carbon economy, aiming to identify policies and institutional strategies that can support a rapid and orderly decarbonisation. It addressed a central societal challenge: how to finance the transition, manage its macro-financial risks and ensure that climate policies remain credible, effective and socially sustainable.

Work performed from the beginning of the project to the end of the period covered by the report and main results achieved so far

The work was organised into three main areas.
First, we developed new behavioural macroeconomic approaches that integrate heterogeneous climate-related expectations into models of investment and innovation. This work showed how beliefs about future climate policy—its credibility, stability and political drivers—influence investment decisions, stranding risk and transition dynamics. It also opened a new experimental line on how expectations about climate policy are formed.
Second, we analysed the macroeconomic and financial implications of decarbonisation. Using both analytical and simulation-based models, we examined how policies propagate across sectors and countries, how financing constraints affect clean innovation, how production networks shape distributional outcomes, and how transition risks can generate nonlinear macro-financial effects.
Third, we studied the political economy of climate transition and the evolving role of central banks and financial regulators. This included work on institutional dynamics in sustainable finance policy-making and empirical research on how central banks communicate about climate risks.

Progress beyond the state of the art and expected potential impact (including the socio-economic impact and the wider societal implications of the project so far)

A major project output was the creation of CBSpeeches, the largest open dataset of central bank speeches worldwide, publicly released to support further research on climate communication and financial stability. All modelling code and datasets were made open-access to maximise transparency and reuse.

Overall, SMOOTH helped establish a coherent and internationally recognised research programme bridging behavioural economics, macro-finance and political economy. It supported the creation and consolidation of the Bologna Environmental Economics Group (BEEG) and launched several early-career researchers into leading academic and policy positions. Its findings contributed to public and policy debates on sustainable finance and climate-related risks, and the research agenda initiated by SMOOTH will continue under the PI’s new ERC Consolidator Grant.

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