Green Finance

How financial policymakers are slowly taking on climate change

Note: You can Download the UNEP Inquiry report launched at the World Economic Forum in Davos from HERE
For most part, these diligent professionals - finance ministers, central bankers, regulators and investors do not consider climate change to fall within their job description and mandate. This remarkable compartmentalisation has been reinforced by the failure of climate activists to reach out to financial policymakers.

However, there are signs that things are changing and changing fast.

Mounting evidence of climate change and increasing estimates of how large a financial, economic and human development impact this will have is making it ever harder even for the most conservative central bankers so forswear responsibility.  Financial regulators have begun to seriously think through the financial impact of stranded assets. Finance ministries are waking up to the extensive cost of fossil fuel subsidies and the tremendous opportunity offered by carbon and other environmental taxes. Long-term investors such as sovereign wealth funds are waking up not just to the financial risks posed by exposure to fossil fuel investments, but also to the tremendous financial opportunities offered by renewables and energy efficiency.

Green Financial System: Funding the Green New Deal

As the Euro crisis intensifies, an even more serious crisis is brewing in the background, that of impending climate change that threatens not just Europe, but all of humanity. Recent figures on green house gas emissions that exceed the worst case scenario predicted by scientists have shocked the global community. 

At the same time, it has become clear that the biggest missing element from all of the European Union's proposals to stem the Euro crisis has been the absence of any growth strategy. Without growth in Europe, we are all doomed to a fate of debt and deflation.

The 99% and Occupy movements have stimulated a wide-ranging public debate about the lack of opportunities, for those at the bottom rungs of society, as well as about the rising levels of inequality accross the world. The EU now has receod unemployment. 

Our New Blue Print: Funding the Green New Deal: Building a Green Financial System, lays out a detailed plan for how to simultaneously attack these multiple crises.

Financing Real Investments in the EU

Investments that are growth-enhancing, that generate employment and that improve the sustainability of the economy are good and desirable. However, even before the crisis hit, the European Union suffered form a lack of optimal levels of investments in infrastructure, green energy and energy efficiency measures and small and medium sized enterprises. This was driven by a number of factors inherent to these kinds of desirable investments for example high upfront costs and long payoff periods in the case of infrastructure investments and a lack of policy certainty on carbon price for green investments. An additional problem was misallocation of resources by the financial sector because of excessive short-termism and crowding out by speculative investments.

The crisis exacerbated the paucity of investments flowing to these desirable categories. However, policy makers have been handed a unique opportunity to address many of these deficiencies for example through a more informed reform of the financial system and through the introduction of new and innovative sources of financing. This Policy Brief for the European Parliament identifies the main obstacles that impede desirable investments in the real econmomy and puts forward a set of concrete suggestions on how to tackle these and stimulate more investments in infrastructure, energy effeciency, green energy and SMEs.