Green Finance: Making the Transition to a Climate-Resilient Future
November 14, 2017 Global
How the bond market is leading the way
Green finance is the financing of investments that provide environmental benefits in the broader context of environmentally sustainable development. It includes all forms of investment, both debt and equity, which protect the environment, conserve natural resources and help mitigate or adapt to a changing climate. It is used in the implementation of ‘green’ infrastructure plans which aid in delivering energy security and other productivity increasing measures such as improved human health.
The main green finance instrument is a green bond. A green bond is a fixed-income instrument where the capital raised or revenue stream connected to the bond must be for projects that benefit the environment.
Climate-aligned bonds, bonds used to finance - or re-finance - projects needed to address climate change, can be labelled or unlabelled. Unlabelled climate-aligned bonds are estimated at $674bn. Only a small portion of climate-aligned bonds, approximately $221bn2, are labelled as green bonds.