Climate Innovations in Finance

2019

2024

The fight against climate change has given rise to innovative financial instruments, with transition bonds emerging as a crucial tool for supporting companies transitioning from high-carbon to low-carbon practices. While green bonds have traditionally dominated the sustainable finance landscape, transition bonds offer a distinct avenue for industries that are on the journey towards sustainability but are not yet fully aligned with green finance standards. This article provides a comprehensive examination of transition bonds, contrasting them with green bonds in terms of structure, purpose, and market implications. Furthermore, it explores the role of both bond types in addressing the broader challenges of decarbonization and the shift towards net-zero economies.

Shanlax International Journal of Management

One of the most important issues confronting mankind in the twenty-first century is climate change. These days, more people are aware of global warming and its negative effects on human existence. Change is thus necessary for survival, and ongoing efforts should be undertaken to manage the environment in a sustainable way. The necessity for quick action has increased as the effects of global warming become more obvious. The role of finance in addressing climate change goes beyond mere funding; it serves as a catalyst for sustainable development, driving innovation, incentivizing low-carbon investments, and reshaping the global economy towards a more resilient and low-carbon future. This paper highlights the pivotal role of finance in addressing climate change and highlights the transformative potential it holds for a sustainable future.

H2020 COP21:RIPPLES, 2019

The report is a deliverable to Horizon2020 Project COP21 RIPPLES. It departs from the novelty of Paris Agreement’s article 2.1.c and its goal of shifting all financial flows towards climate alignment in terms of both mitigation and adaptation. Such a new and all-encompassing goal created the commitment among signatory countries to build individual strategies for bringing their financial sectors under compliance. In order to achieve so and following the remaining bottom-up approach brought by the Agreement (e.g. with the NDCs), finance must be understood in its multiplicity and dynamism across different theoretical and governance traditions, grounding a more polycentric framework that enables tailored – and often more effective locally and nationally – financial solutions in terms of climate alignment. Based on this, the report goes on to dive into six different financial sector-specific theories, policy and governance approaches, bringing them under the light of the climate urgency. After discussing them in some detail, we have built an exploratory framework to compare how different countries/regions have been approaching their national financial sector against the responsibility brought by the need of a total shift towards climate alignment. Finally, we use the framework to pilot the comparison between two important current approaches: (i) the Action Plan on Sustainable Finance, by the European Union, and (ii) the Guidelines for Establishing the Green Financial System, by China.

2000

UBS integrates environmental aspects into its various banking activities (commercial banking, asset management and investment banking). For many of our clients, environmental considerations not only represent financial risks, they also mean new business opportunities. This paper highlights UBS' efforts to explore possible environmental market o#n-tunities resulting from the increasingly signaficant impact of global climate policies on the banking business. A careful analysis of the Kyoto Protocol-the international agreement to control global warming by reducing emissions of greenhouse gases-and its impact on thefinancial sector has led UBS to assess the new market potentialfor a climate value investment product. In this article, the authors describe thepremises behind such an investment vehicle as well as the most important steps and criteria needed for setting up the project portfolio. In addition, besides clatifiing the most significant operational modalities of such an investment poduct, this paper also explains the importance of being an early mover in the greenhouse gas reduction market.

Economies

In recent times, the green transition, by promoting carbon neutrality, has become highly imperative to meet environmental challenges. The present literature review study seeks to explore the intersecting role of greener innovations in facilitating financial inclusion for a sustainable future. Within the global agenda is the goal of carbon neutrality, with the aim of reducing environmental impact and mitigating climate change. Aim: The present study aims to investigate the role that technological innovations play in the financial inclusion of achieving climate neutrality. Method: Through a systematic literature review, we investigate how new innovations generate new investment opportunities and promote sustainable development. However, fair, accessible, and inclusive financing is crucial. Findings: the analyzed documents in this study shows that technological innovations can play an important role in financial inclusion for carbon neutrality and provide some important policy implicat...

KOREA REVIEW OF INTERNATIONAL STUDIES , 2023

In today's world, the sole pursuit of financial gain by organizations is a thing of the past. Instead, there is a growing recognition of the vital importance of natural resource preservation and environmental protection across all aspects of life. This shift has prompted extensive global research to uncover innovative strategies for achieving sustainability. To address the urgent need to safeguard the environment, combat climate change, invest in renewable energy sources, expand green spaces, and support various sustainable development endeavour's, the concept of "Climate Finance" has emerged. This article delves into the multifaceted components of green financing, encompassing green banking, green insurance, and green bonds. Furthermore, it explores the potential and challenges associated with Climate Finance. Drawing from contemporary literature, the article endeavours to shed new light on Climate Finance as a valuable tool for promoting sustainability, particularly in developing nations like India.

Vierteljahrshefte zur Wirtschaftsforschung, 2019

European governments are striving to meet the ambitious goals of the Paris Climate Agreement of 2015. The German government wants to limit the CO 2 emissions so that the global temperature increase does not exceed 1.5 degrees Celsius. How this aim will be achieved concretely is still an open question. However, concrete steps must be decided upon urgently. Sustainability Policies In sustainability policy, two main concepts are under discussion: CO 2 pricing and "green investments." The latter, in turn, could be financed through the issuance of "green government bonds," i. e. bonds issued by the public purse for green investment. The Federal Ministry of Finance in Germany recently pushed forward considerations in this direction. Green bonds are also an essential part of the Green Finance policy of the EU Commission. Duco Claringbould, Martin Koch, and Philip Owen provide in their work, Sustainable finance: the European Union's approach to increasing sustainable investments and growth-opportunities and challenges, an overview of the most important current EU initiatives contributing to sustainable finance. The authors outline the need for sustainable finance to achieve EU and international policy goals and to provide a discussion of sustainable finance from a theoretical perspective. They review the most important existing EU initiatives to foster sustainable finance: the Action Plan on financing sustainable growth, the EU Emissions Trading System, and EU financial support contributing to sustainable finance. The Action Plan aims to develop an EU Green Bond Standard, as well as benchmarks for low-carbon investment strategies and climate-related reporting. The authors also provide a discussion of the challenges and political implications of current sustainable finance policies for the EU.

SSRN Electronic Journal, 2016

The agreement of the climate-negotiating parties in Paris in December 2015 (COP21) signaled the world's intent to decarbonize over the coming decades in order to keep the earth's average temperature increase below 2 degrees Celsius by mid-century. A timely and smooth transition to a low-carbon economy may be accomplished if businesses routinely disclose and manage carbon dioxide emissions subject to science-based targets along with climate-related financial risks and financial performance. Existing capital budgeting techniques can help create value sustainably by focusing on the opportunity costs of both financial capital and carbon dioxide thus improving the allocations of both financial and atmospheric capital. Business efforts in this area will be most effective if guided by supportive government policy. If the voluntary responses from businesses, consumers, investors and local policy-makers fail to meet the science-based deadline for carbon dioxide emission reduction, aggressive and globally enforced carbon pricing mechanisms and emissions restrictions may become necessary. To the extent the business community is unprepared for broad-based climate policy intervention individual firm balance sheets may become impaired. In this case the greater likelihood of financial insolvencies in carbon-intensive and related industries will challenge the stability of the global financial system. It is therefore imperative that the problem of financial institutions that are "too big to fail" be addressed expeditiously by reducing financial firms' holdings of high-carbon assets.

Finance is the supporting means for the implementation of mitigation and adaptation activities in an international climate agreement. However, discussions on finance under the UNFCCC umbrella have come to a stalemate on definitions. The most promising source of finance, the private sector, has become a polarising issue in the negotiations. Yet, outside of the negotiations, there is some good news: investors are becoming more aware of climate risks and considering the potential impacts on their investments. Universities and pension funds are actively considering divesting from fossil fuel. Many of the green bonds issued by development banks, and now by corporate entities, were sold out within minutes of issuance. If the potential demand for private-sector investment is to be harnessed, three key questions need to be addressed: How might the opportunities and challenges be used to catalyse the burgeoning interest in private financing for climate activities? What can the public sector ...