With public budgets increasingly strained, policymakers are turning their attention to the seemingly abundant capacities of the private financial sector (including commercial banks, insurance companies, asset managers, institutional investors, etc.). The financial sector itself has made significant progress since the Paris Agreement propelled by the European sustainable finance agenda. I4CE‘s past work on financial regulation had supported this evolution from sustainability disclosure and stress-testing for the banks, to supporting the integration of transition plans into the banking prudential regulation CRD VI, better risk management of stranded assets and taking account of climate issues in variable remuneration schemes. This has led to a better understanding of climate risks, increasing sophistication of methodologies, improved data sourcing and transparency.
Yet, the volume of financing flows for real economy transition and adaptation needs remains limited. Delayed action further risks increasing the costs of a disorderly transition, including adaptation costs. These costs would weigh on governments, households, enterprises and private financial actors.
I4CE examines this year whether and how the private financial sector can be further harnessed in concert with other private and public actors to finance the real economy’s transition and adaptation needs. This includes exploring key sectoral opportunities and supporting financial mechanisms as well as enabling conditions (e.g. financial regulations) to mobilise private financial actors. In particular, I4CE analyses the issues constraining the bankability of cleantech scale-up projects to crowd-in bank financing. I4CE also studies how financial institutions can play a role in coordination with the financing dynamics of local actors for adaptation needs. In doing so, the Institute contributes to policy debates at both the French and European levels.
