Financing inclusive green growth through international capital markets

Project description

Investments for growth and development have to be as green and sustainable as possible in the future to prevent an even greater rise in temperature and adapt to the new climatic conditions. Therefore, first of all huge investments in green infrastructure in developed and developing countries will be necessary in the coming years. But, state budgets - and thus official development assistance and other official flows - will be unable to provide such sums of money.

On the other hand, private and institutional investors (such as pension funds, insurance companies and sovereign wealth funds) do have the necessary capital to finance a green transformation, as they manage assets worth several trillion US dollars and, unlike commercial banks, have a definite interest in long-term investments. Unfortunately, however, the sustainable investment activities of these investors are negligible, particularly for investments in developing countries and emerging economies. The reasons for this are straightforward: as subsidies for fossil fuels remain high, green investments appear unnecessary and unprofitable. Moreover, these groups of investors consider the risks of sustainable capital investments to be too high.

One solution to this dilemma is to alleviate the impact of disincentives and to provide positive incentives through the targeted use of public funds, i.e. through structured funds or guaranties. In this way, public donors and development-financing institutions can motivate private and institutional investors to inject capital into green investment products. So far, however, we do not know a great deal about mobilising private and/or institutional capital for sustainable investments. This research project, therefore, analyses ways to overcome the constraints to financing inclusive green growth.

Among other things the projects supports the G20 Dialogue Platform for Inclusive Green Investments with background research on the question what governments can do to effectively facilitate the mobilisation of capital for green investments in developing countries and emerging economies.

Events

Mobilising Long-Term Finance for Green Investments