Unleashing the power of financial markets for the green transition

Abstract

There has been growing momentum and countless new initiatives over the past years which are committed to greening the financial system. But the financial system is only responding at the margin. We continue to invest in high-carbon industries, with greenhouse gas emissions at record highs past years. Multiple market factors, information failures and policy distortions within the capital markets create a bias towards the status quo and today we have a financial sector which has largely only responded in an ad hoc way to the climate crisis. To drive real change, we need to tackle systemic barriers such as regulatory disincentives, traditional mindsets, low asset allocation for infrastructure and climate-tech, unclear product taxonomy, limited data and tools, and lack of transparency. This paper highlights a few of the many and much needed examples of sustainable finance entrepreneurs, leaders and innovators that are seeking to tackle these capital-market specific constraints to accelerate green finance at the scale, speed and ambition required.