These countries are leading the way in green finance

Sep 12, 2019

Buses with solar panels installed on their roofs to save electricity are seen in a parking lot in Hangzhou, Jiangsu Province, China, March 17, 2016. Image: REUTERS

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This article is part of: Sustainable Development Impact Summit

What if more money went into financing projects and policies that help the planet?

Creating a greener economy requires significant investment, whether that is funding a new network of electric buses, the creation of a solar farm, or building power plants that run on renewable energy.

And that means that the green bond market - money borrowed to invest in environmentally-friendly projects - is a good measure of the progress that countries are making on tackling climate change.

Since 2007, when the first green bonds were issued to help finance climate change solutions, the market has grown to reach a global total of $521 bn. And nearly 200 countries committed to mobilizing green finance under the terms of the 2015 Paris Agreement on climate change

The transition to a low-carbon, sustainable approach to growth could lead to an economic boost of $26 trillion up to 2030 and help create more than 65 million new jobs, according to the Global Commission on the Economy and Climate.

The financing of sustainable development is one of the key themes at this year’s Sustainable Development Impact Summit, taking place during the United Nations General Assembly at the end of September.

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What is the World Economic Forum’s Sustainable Development Impact summit?

It’s an annual meeting featuring top examples of public-private cooperation and Fourth Industrial Revolution technologies being used to develop the sustainable development agenda.

It runs alongside the United Nations General Assembly, which this year features a one-day climate summit. This is timely given rising public fears – and citizen action – over weather conditions, pollution, ocean health and dwindling wildlife. It also reflects the understanding of the growing business case for action.

The UN’s Strategic Development Goals and the Paris Agreement provide the architecture for resolving many of these challenges. But to achieve this, we need to change the patterns of production, operation and consumption.

The World Economic Forum’s work is key, with the summit offering the opportunity to debate, discuss and engage on these issues at a global policy level.

Here’s what some of the countries leading the way in green finance are doing.

United States

The US is head of the pack when it comes to green bonds, with $118.6 billion issued in 2018. Total US-based managed assets using sustainable strategies grew from $8.7 trillion at the start of 2016 to $12 trillion at the start of 2018 - an increase of 38%, according to the Global Sustainable Investment Review. This spike is reportedly being led by client demand, with 40% of US fund managers pointing to the UN Sustainable Development Goals as motivation for new investment in sustainable schemes.

France

In 2017, France issued its first sovereign green bond in a bid to make Paris a financial centre for economic transition. The bond allowed France to borrow 7 billion euros to support clean energy projects. At the time, it was believed to be the largest-scale issuance with the longest maturity date ever seen on the young green bond market.

Image: Climate Bonds Initiative

Have you read?

Netherlands issues a massive Green Bond – starting the new age of conservation finance

China

At a G20 summit held in 2016 in Hangzhou, every government head agreed to a shared goal of promoting green finance - a win for China that followed its own plan to pursue a green finance policy. China hopes to encourage greater private investment in green sectors to support a low-carbon transformation for its economy; with policy incentives such as a green development fund.

United Kingdom

In July 2019, the UK government announced a Green Finance Strategy, with plans to build regulatory frameworks for green finance alongside improved access to investment for green projects. The government is working with industry to establish a set of Sustainable Finance Standards - making sure that all of the financial risks and opportunities from climate and environmental factors are woven into investment decision-making.

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Financing Sustainable Development

The world’s economies are already absorbing the costs of climate change and a “business as usual” approach that is obsolete. Both scientific evidence and the dislocation of people are highlighting the urgent need to create a sustainable, inclusive and climate-resilient future.

This will require no less than a transformation of our current economic model into one that generates long-term value by balancing natural, social, human and financial conditions. Cooperation between different stakeholders will be vital to developing the innovative strategies, partnerships and markets that will drive this transformation and allow us to raise the trillions of dollars in investments that are needed.

To tackle these challenges, Financing Sustainable Development is one of the four focus areas at the World Economic Forum's 2019 Sustainable Development Impact summit. A range of sessions will spotlight the innovative financial models, pioneering solutions and scalable best practices that can mobilize capital for the the world's sustainable development goals. It will focus on the conditions that both public and private institutions should create to enable large-scale financing of sustainable development. It will also explore the role that governments, corporations, investors, philanthropists and consumers could play to deliver new ways of financing sustainable development.

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