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Figure from:Climate Change in the Theory of Finance

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SOUTCE, MIOQHICaG OM COLCNOTaANGer, LINGMela, LUIKIN, & WUIdano (2U16) There is scope to use or adapt many of these financing instruments for specifically green or climate purposes. n equity-based financing, the financing instruments are listed shares, equity-based crowd funding, private equity, venture capital, joint-venture or co-investment platforms, project equity, and public-private partnerships. Some of hese instruments are not necessarily mutually exclusive, as equity-based financing may be a combination of these. Venture capital (VC) and private equity (PE) investment in renewable energy, for instance, rose to USD$3 billion in 2019, its highest since 2015 but less than a third of its peak since 2008. VC/PE investment in solar rose "to $1.8 billion, and more than doubled to $529 million for wind, while falling just over a third to $396 million for bio- fuels (UNEP/BNEF, 2020)." Most of the largest deals were equity injections into project development companies. Table 3 below describes the trend of global venture capital (VC) and private equity (PE) financing for 2005-2019. Journal of Economics and Sustainable Development ISSN 2222-1700 (Paper) ISSN 2222-2855 (Online) Vol.11, No.18, 2020

Table 3 SOUTCE, MIOQHICaG OM COLCNOTaANGer, LINGMela, LUIKIN, & WUIdano (2U16) There is scope to use or adapt many of these financing instruments for specifically green or climate purposes. n equity-based financing, the financing instruments are listed shares, equity-based crowd funding, private equity, venture capital, joint-venture or co-investment platforms, project equity, and public-private partnerships. Some of hese instruments are not necessarily mutually exclusive, as equity-based financing may be a combination of these. Venture capital (VC) and private equity (PE) investment in renewable energy, for instance, rose to USD$3 billion in 2019, its highest since 2015 but less than a third of its peak since 2008. VC/PE investment in solar rose "to $1.8 billion, and more than doubled to $529 million for wind, while falling just over a third to $396 million for bio- fuels (UNEP/BNEF, 2020)." Most of the largest deals were equity injections into project development companies. Table 3 below describes the trend of global venture capital (VC) and private equity (PE) financing for 2005-2019. Journal of Economics and Sustainable Development ISSN 2222-1700 (Paper) ISSN 2222-2855 (Online) Vol.11, No.18, 2020

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The earth's average temperature of about 15°C in May 2020 was not unusual given past fluctuations. There ar natural fluctuations in climate temperature as well as changes due to human causes. Nature-induced increment i1 temperature is linked to the greenhouse effect, which describes how the atmosphere traps some of the Sun's energy Solar energy radiating back to space is absorbed by greenhouse gases (GHG) and re-emitted in all directions. Th solar energy heats the earth's atmosphere and the planet's surface such that in the absence of this greenhouse effect the world would have been much colder and uninhabitable. However, scientists believe that humans add to th natural greenhouse effect through greenhouse gas emissions from industry and agriculture, trapping more energ’ and increasing the temperature. The real extent of the environmental- impact-induced-climate change remain uncertain though recent scientific evidence, as documented by the Intergovernmental Panel on Climate Chang (IPCC, 2018), is increasingly worrisome. Many public and private institutions are attempting to take steps towar averting a catastrophe. Figure 1 below shows a 140-year trend (1880-2020) in the change in the earth's averag temperature. The "human drivers only" trend-line of increase in global temperature is highly correlated witl observed temperatures implying that it can be within the control of humans to address the risk of global warming Figure 1: Climate Variability and Climate Change Over the 140 years 1880-2020 EE A few of the critical questions that have occupied climate change researchers include: Who will provide finance and at what levels? How will the international agreements on climate change encourage countries to mobilize finance domestically? How will finance for adaptation work? How will international climate agreements ensure better reporting of how finance flows? Further, many sectors within the global economy ranging from energy, buildings/real estate, transportation, food, and financial sectors are directly impacted by the risks generated
The earth's average temperature of about 15°C in May 2020 was not unusual given past fluctuations. There ar natural fluctuations in climate temperature as well as changes due to human causes. Nature-induced increment i1 temperature is linked to the greenhouse effect, which describes how the atmosphere traps some of the Sun's energy Solar energy radiating back to space is absorbed by greenhouse gases (GHG) and re-emitted in all directions. Th solar energy heats the earth's atmosphere and the planet's surface such that in the absence of this greenhouse effect the world would have been much colder and uninhabitable. However, scientists believe that humans add to th natural greenhouse effect through greenhouse gas emissions from industry and agriculture, trapping more energ’ and increasing the temperature. The real extent of the environmental- impact-induced-climate change remain uncertain though recent scientific evidence, as documented by the Intergovernmental Panel on Climate Chang (IPCC, 2018), is increasingly worrisome. Many public and private institutions are attempting to take steps towar averting a catastrophe. Figure 1 below shows a 140-year trend (1880-2020) in the change in the earth's averag temperature. The "human drivers only" trend-line of increase in global temperature is highly correlated witl observed temperatures implying that it can be within the control of humans to address the risk of global warming Figure 1: Climate Variability and Climate Change Over the 140 years 1880-2020 EE A few of the critical questions that have occupied climate change researchers include: Who will provide finance and at what levels? How will the international agreements on climate change encourage countries to mobilize finance domestically? How will finance for adaptation work? How will international climate agreements ensure better reporting of how finance flows? Further, many sectors within the global economy ranging from energy, buildings/real estate, transportation, food, and financial sectors are directly impacted by the risks generated
Unpacking the constituent elements within these pools of public, private, and institutional capital is essential, given the different factors such as risk-return expectations and investment horizons of various investor groups. For example, private equity and infrastructure funds seek the highest return and make equity investments in projects with strong growth potential. These funds are often willing to invest in relatively unproven markets and technologies over the medium term (5-15 years). In contrast, pension funds and life insurance companies search for investments that provide predictable income streams to meet long-term obligations such as pensions or insurance claims but need relatively high liquidity to meet demands. Therefore, public capital sources and private investor profiles will suit different types and life-cycle stages of public infrastructure projects. The largest capital pool in terms of assets under management may not necessarily be the most promising source of finance (Floater et al., 2017b). Public finance and development assistance can play an essential role in improving the risk-adjusted returns associated with different infrastructure projects and catalyzing private and institutional sector participation. Table 1: Potential Sources of Private Finance for Sustainable Urban Infrastructure and Barriers faced by each Investor Type
Unpacking the constituent elements within these pools of public, private, and institutional capital is essential, given the different factors such as risk-return expectations and investment horizons of various investor groups. For example, private equity and infrastructure funds seek the highest return and make equity investments in projects with strong growth potential. These funds are often willing to invest in relatively unproven markets and technologies over the medium term (5-15 years). In contrast, pension funds and life insurance companies search for investments that provide predictable income streams to meet long-term obligations such as pensions or insurance claims but need relatively high liquidity to meet demands. Therefore, public capital sources and private investor profiles will suit different types and life-cycle stages of public infrastructure projects. The largest capital pool in terms of assets under management may not necessarily be the most promising source of finance (Floater et al., 2017b). Public finance and development assistance can play an essential role in improving the risk-adjusted returns associated with different infrastructure projects and catalyzing private and institutional sector participation. Table 1: Potential Sources of Private Finance for Sustainable Urban Infrastructure and Barriers faced by each Investor Type
Journal of Economics and Sustainable Development ISSN 2222-1700 (Paper) ISSN 2222-2855 (Online) Vol.11, No.18, 2020
Journal of Economics and Sustainable Development ISSN 2222-1700 (Paper) ISSN 2222-2855 (Online) Vol.11, No.18, 2020
sources: UNEF, Frankturt-Sscnool UNEF-Centre, bloombergNEF According to the Climate Bond Initiative, in debt-based financing, the total value of ‘green bonds' is as of December 2019 was USD257.7bn up by 51 percent from the 20 largely driven by the European America accounted for 25% and market, which accounted for 4 23%, respectively. Such green 8 figure of USD170.6bn. The 2019 volume was 5% of global issuance. Asia-Pacific and North bonds may be tied to specific, environmentally positive projects such as public transport, renewable energy, or solid waste management. This is what is commonly referred to as project finance or 0 ff-balance-sheet financing (OBS F). Alternatively, governments may issue general obligation green bonds (as the cities of Johannesburg, Mexico City, and Ottawa have done) raise financing for environmental projects without clear revenue streams, includin: balance sheet financing). Similar y, fees, taxes, and charges may compatible forms of urban development. Carbon pricing is de accelerate a low-carbon transition (Stiglitz et al., 2017). Otherwise, the design of land/property taxes or additional interventions such as congestion g adaptation initiatives (also referred to as on- be designed to steer investment towards climate- finitely the most economically efficient way to pricing can be used to incentivize more carbon-efficient modes of urban growth. Development financing institutions already widely use risk mitigation instruments and grants to crowd in private investment for low-carbon infrastructure projects, but this could be accelerated and scaled (Bhattacharya et al., 2016). Out of the diversity of mechanisms set out in Table 2, some have particular promise to support investment in sustainable urban infrastructure at scale (Floater et a/., 2017a). Table 4 below presents a list of national securities markets with a dedicated green bond section. As of the end of December 2019, there were 18 such Exchanges around the world. ee ee ey oe a a
sources: UNEF, Frankturt-Sscnool UNEF-Centre, bloombergNEF According to the Climate Bond Initiative, in debt-based financing, the total value of ‘green bonds' is as of December 2019 was USD257.7bn up by 51 percent from the 20 largely driven by the European America accounted for 25% and market, which accounted for 4 23%, respectively. Such green 8 figure of USD170.6bn. The 2019 volume was 5% of global issuance. Asia-Pacific and North bonds may be tied to specific, environmentally positive projects such as public transport, renewable energy, or solid waste management. This is what is commonly referred to as project finance or 0 ff-balance-sheet financing (OBS F). Alternatively, governments may issue general obligation green bonds (as the cities of Johannesburg, Mexico City, and Ottawa have done) raise financing for environmental projects without clear revenue streams, includin: balance sheet financing). Similar y, fees, taxes, and charges may compatible forms of urban development. Carbon pricing is de accelerate a low-carbon transition (Stiglitz et al., 2017). Otherwise, the design of land/property taxes or additional interventions such as congestion g adaptation initiatives (also referred to as on- be designed to steer investment towards climate- finitely the most economically efficient way to pricing can be used to incentivize more carbon-efficient modes of urban growth. Development financing institutions already widely use risk mitigation instruments and grants to crowd in private investment for low-carbon infrastructure projects, but this could be accelerated and scaled (Bhattacharya et al., 2016). Out of the diversity of mechanisms set out in Table 2, some have particular promise to support investment in sustainable urban infrastructure at scale (Floater et a/., 2017a). Table 4 below presents a list of national securities markets with a dedicated green bond section. As of the end of December 2019, there were 18 such Exchanges around the world. ee ee ey oe a a
New investment volume adjusts for re-invested equity. Total values include estimates for undisclosed deals. Pricing, regulation, and standards can drive investments into sustainable urban infrastructure. Economic efficiency highlights the advantages of a typical global carbon price, with emissions reductions occurring wherever the marginal costs are lowest. By 2017, 42 national and 25 sub-national jurisdictions were pricing carbon (Stiglitz et al., 2017). In the absence of a carbon price or where additional externalities must be considered (such as air pollution or technological learning), other pricing schemes can further spur investment. For example, incentives for electric cars and rooftop photovoltaic panels have played a significant role in growing those in China and Europe (Shive & Forster, 2020).
New investment volume adjusts for re-invested equity. Total values include estimates for undisclosed deals. Pricing, regulation, and standards can drive investments into sustainable urban infrastructure. Economic efficiency highlights the advantages of a typical global carbon price, with emissions reductions occurring wherever the marginal costs are lowest. By 2017, 42 national and 25 sub-national jurisdictions were pricing carbon (Stiglitz et al., 2017). In the absence of a carbon price or where additional externalities must be considered (such as air pollution or technological learning), other pricing schemes can further spur investment. For example, incentives for electric cars and rooftop photovoltaic panels have played a significant role in growing those in China and Europe (Shive & Forster, 2020).