Green bonds – investing in green, climate-friendly technologies – is an important way to tackle climate change, argue two climate experts at the Centre for International Climate Research.
Harald Lund and Elisabeth Lannoo, of the Centre for International Climate Research (Cicero) in Norway, write in Euractiv that the transition to a low-carbon and climate change-resilient society will “depend on investors moving their money from yesterday’s technologies that lock in carbon emissions, to new climate-friendly technologies”.
The recent flooding and storms across Asia, the Caribbean and the US underline the point that investors are increasingly exposed to the physical risks of climate change. The advisers at Cicero say that green bonds are one way for investors to reduce their exposure to climate risk. So how is climate-friendly finance – green bonds in particular – being developed? Bonds that require investment in new, clean technologies and renewable energy have been around for some time. According to the experts at Cicero, Nordic investors were first to enter the market, followed by Christian investment funds investing in ethical, sustainable funds. The article notes that green bonds have now become popular among Chinese investors and in Islamic financial markets. A landmark development came this summer when a Malaysian solar energy firm launched the first green Shariah-compliant bond (sukuk).
Europe is also playing an important role in developing the global green bond market, with groups focusing on sustainable finance such as the European Commission's High Level Group on Sustainable Financing. The two authors from Cicero sum up the European position as follows: “Europe is looking for a strategy that can give its financial industry a leading role in this rapidly growing market. Perhaps the setback in climate policies in the US under president Trump can give the EU a head start.”
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