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Shifting Private Finance towards Climate Friendly Investments – Policy options for mobilizing institutional investors’ capital for climate-friendly investment

6 March 2015 - Special issues - By : Ian COCHRAN, Phd

A report produced by the Financing the Future Consortium including: Triple E Consulting, Climate Bonds Initiative, 2° Investing Initiative, Frankfurt School UNEP Collaborating Centre for Climate & Sustainable Energy Finance, CDC Climat, Climatekos, CDP, Climate Policy Initiative, Get2C

The report provides the European Commission with an actionable toolbox to steer private finance towards climate-friendly investments, defined as those aligned with the EU’s transition to a low-carbon and climate resilient economy that limits global warming to 2°C.

Two categories of barriers to investment were identified: (1) Barriers that are external to institutional investors’ decision-making framework, e.g. availability and volume of climate-related investment options, less favorable risk/return profile, high transaction costs; (2) Barriers arising from institutional investors’ decision-making framework, e.g. mismatching time horizon of decision-making, lack of integration of climate in fiduciary duty and engagement practices, lack of relevant climate-related risk and performance methodologies.

There is a role for policymakers to speed up market enablers, including short-term measures such as credit enhancement initiatives and supporting green securitization, increasing the volume and acceptance of financial products such as green bonds as well as longer-term actions such as policy risk insurance and the development of climate performance metrics and carbon risk assessment to lengthen time horizons for investors.

Shifting Private Finance towards Climate Friendly Investments – Policy options for mobilizing institutional investors’ capital for climate-friendly investment Download
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