The green finance market has been growing rapidly, and it’s expected to be worth $2.36 trillion by 2023.
Green finance simply means any targeted financial efforts that have sustainability as a major goal.
Sustainable Development Goals are a priority that benefits everyone. One way to help bring these goals to life is by green financing. However, countries need to make significant efforts to retool their banking and lending structures before the green finances dream can become a reality.
A country will need to re-engineer their regulatory framework to make green borrowing compliant, for starters. They’ll also need to steer public sector planning in an environmentally-friendly way.
Clean sources of energy can be made possible with the right mixture of planning, priorities and capital. These types of projects would also get preferential treatment to make them more appealing than fossil-fuel derived energy infrastructure.
Financing projects under the green finance umbrella include:
- Renewable energy and clean energy
- The methods for managing pollution.
- The conservation of biodiversity
- The circular economy is a new model for producing, consuming and handling waste that is more sustainable.
- The sustainable use of natural resources and land.
With the rise of globalisation, interest in green finance is beginning to spread internationally.
One amazing green finance tool is known as the green bond. The Bond Market Association (BMA) defines what qualifies as a green bond. To be considered green, a bond must adhere to certain important criteria. For example, having a process for project selection and evaluation, proper management of funds and a detailed reporting mechanism.
At the end of 2017, the US was the biggest issuer of green bonds. China and France are second and third respectively.
Private financing plays an important role in curbing greenhouse gas emissions and containing climate change in developing countries.
Global economic leaders are beginning to understand that green finances has significant positive impact and incentive for sustainable projects.
Countries around the world, most notably China, are steadily working towards making green financing more relevant. The goal is to tackle climate change, pollution and also improve economic growth for struggling economies torpedoed by the global energy crisis.
Some of the ways which countries are using green finance is by investing in renewable energy, electric and green fuel vehicles, and new infrastructure projects.
Who are the main Green Finance Stakeholders?
There are several stakeholders and parties involved in dispersing and utilising green finance. One major role is played by companies. Large corporations utilise green finance and redirect the funds in CSR initiatives. This also acts as an added incentive to companies to stick to their CSR commitments and bring about effective change. Through green finance, companies invest in various areas such as green energy, infrastructure projects etc.
Another important layer and role in green financing is played by banks. Countries’ banks channel green finance into the right hands. Aside from domestic banks, global financial institutions also play an integral role in scaling sustainable projects through effective and timely investing. Some of these methods used by them include utilising green bonds.
Governments of countries play the final role in green financing and regulate investments in green projects. For instance by allocating certain amounts that banks need to lend in the form of green finance. Domestic banks and regulators provide institutional support.
Stock exchanges often specialise in green and sustainable investments.
The market continues to grow as new marketers enter the field.
There are many regulations restricting the growth of green finance, but these are being reversed.
Governments of countries play the final role in green financing and regulate investments in green projects. For instance by allocating certain amounts that banks need to lend in the form of green finance. Domestic banks and regulators provide institutional support.