Opening new frontiers in green finance
(Foto: Pixabay/geralt)
In the transition to a low-carbon and climate change-resilient society, we depend on investors moving their money from yesterday’s technologies that lock in carbon emissions, to new climate-friendly technologies. Yet keeping track of carbon emissions is not sufficient. Increasingly, investors are exposed to the physical consequences of climate change, combined with transition risk linked to a change policies and technologies and a liability risk for not taking action on global warming.
Across the world, new low-emission and climate-resilient initiatives are sprouting. How can investors with a global perspective discern promising sprouts from aging woods without renewal? Green bonds are one way for investors to reduce their exposure to climate risk.
A head start for the EU?
Last year, the global green bond market doubled in size, seeing issuances worth more than 80 billion dollars – a record that is set to be broken this year. In the last decade, green bonds have spread around the world, with Nordic investors entering the market first, soon followed by Christian investment funds concerned with values-based investments in sustainability. After green bonds gained foothold in China, Islamic investors have now also entered the market. This summer, a solar energy company in Malaysia launched the first green sukuk – a bond in line with Sharia-rules, which exclude investing in e.g. gambling or alcohol. The Center for International Climate Research reviewed this sukuk and gave it the best rating – dark green (the review can be downloaded ).
