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What’s the story with green finance?

Green finance is transforming investment markets as carbon-heavy industries lose out

Even the world of finance is getting a green makeover. Image: iStock

Even the world of finance is getting a green makeover. Image: iStock

 

As sustainability moves to the heart of business, even the world of finance is getting a green makeover. Financing the economy of tomorrow as we attempt to reduce greenhouse gas emissions and achieve carbon-neutrality will be an expensive process – and green finance is how we are going to pay for it.

In 2007 the first green bonds were issued to help finance climate change solutions, while back in 2015 nearly 200 countries committed to mobilising green finance under the terms of the 2015 Paris Agreement on climate change. Fast-forward to 2020 and green finance is transforming global investment markets as traditional, carbon-heavy industries lose out in favour of more sustainable businesses and projects with defined environmental benefits.

Earlier this year the European Green Deal’s Investment Plan – the Sustainable Europe Investment Plan – was launched, which seeks to encourage up to €1 trillion in private investment towards climate-friendly projects and infrastructure across Europe. There are concerns about “greenwashing” – projects with dubious green credentials – but the EU is now clearly defining what a sustainable project looks like and businesses will have to prove they meet those criteria. Experts are also calling for green finance to be an integral part of the post-Covid recovery plan, saying investment in green infrastructure will be of greater value in the long run.