Global Report – Green Finance and National Institutions
This study, commissioned by the German development cooperation agency Gesellschaft für Internationale Zusammenarbeit (GIZ) and implemented by IPC GmbH, included comprehensive analyses and policy recommendations aimed at bridging the financial and regulatory gaps between higher level global policy and actions on the ground by the private sector. Click here to view the study in full.
As the lead author of this study, Marta Simonetti explored a number of challenges in green finance, namely weak or non-existent markets in clean energy generation in some countries; limited commercial opportunity in environmental and conservation finance; information asymmetries leading to perceptions of excessive risks; lack of adequate finance and limited capacity or experience in structuring blended products such as concessional debt and equity, risk mitigation, local currency framework and insurance.
The global study included several examples implemented worldwide to illustrate best practices for the implementation of green finance from a number of perspectives, including from the private and public sectors, as well as from developed and developing countries. The report also explored the role of regulation and reporting in shaping enabling environments, and the significance of customer and investor choices in creating demand for sustainable services and products.
The success of green finance rests on matching policy planning with dedicated financial instruments that are specifically targeted to the implementation of green finance measures, for the public sector, the private sector and ultimately to support customer choices towards products and services that are truly sustainable.
The samples included the Green Energy Market Securitisation (GEMS) programme of the Hawaii Green Infrastructure Authority and the first green bond issuances by Yes Bank (India) for mobilising liquidity trough green bonds, which were accompanied by targeted policies for the utilisation of proceeds. Green bond issuance can provide good leverage of public and private resources to bring countries and regions closer to their climate targets.
GLS Bank (Germany) introduced innovative banking and non-banking platforms (such a crowd-funding), earmarked for environmentally conscious and socially-oriented projects under much more stringent definitions than ‘traditional’ environmental and social safeguards (ESG) standards. This is exemplary of a corporate policy that since the 1970s has focused on maintaining a specific branding as an ethical financial institution.
The Singapore Exchange (SGX) and the Indonesian regulator Otoritas Jasa Keungan (OJK) provided valuable insights on their role in strengthening capital markets through their ongoing work on reporting guidelines for listed companies. This included the introduction and guidance for the application of environmental and social safeguards (ESG), consistent monitoring and evaluation (M&E) frameworks, as well as reporting and disclosure on companies’ climate risk in their investment portfolios. These practices not only can ensure clarity for investors and customers to make informed choices, but can also underpin better risk analysis and pricing, ultimately leading to a reduction of costs for green technologies and green financial instruments.
The use of blended instruments in national and regional development banks was also highlighted as a measure to mitigate existing technical or financial risks, thus supporting underdeveloped markets (in a given country or sector), acting as a catalyst for further co-financing from the private sector, while also boosting knowledge and institutional / technical capacity in intermediaries and end-borrowers.
Financial systems have a decisive role in greening capital flows and as such in making positive contributions to tackle the negative effects of climate change while also ensuring inclusive and sustainable socio-economic development.
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This case study was written by Marta Simonetti, Founder and Managing Director of Globalfields. Visit Marta's bio or contact us today to discuss this project.