Episode 4: Green Finance | Sustainable Finance | SDGPlus #Finance

dear sustainability guy i think i get sustainable financing but people keep talking about green financing can you explain to me what that is green Finance is actually

a subset of sustainable Finance the most widely accepted definition is given by the united nations environmental program green financing is to increase the level of financial

flows from public private and not-for-Profit sectors to environmentally friendly development priorities the goal here is to manage environmental risks and take up opportunities that provide environmental benefits and a decent rate of financial return green Bonds

green banks carbon financing community-based green funds are all examples of green financing instruments hold on if green Finance is this win-win situation how is it that a

huge bulk of investment still isn’t green well to start with green projects still have several technology risks associated with them for example solar panels have uncertainties regarding their energy storage and weather dependency therefore this makes it difficult for financial institutions

to evaluate the financial risk for these types of green projects coupled with this is the issue of insufficient information since many governments and companies are not openly sharing their environmental performance and progress there is limited information available on the success and failures of

green projects this makes it difficult for financial institutions to identify price and manage their financial and environmental risk then you have the issue of maturity mismatch many green infrastructure projects only pay off in the long term however the financial system is dominated by short to

medium term Investments resulting in a maturity mismatch this is much more common in banks because much of bank’s resources come from deposits and deposits are usually used for short to medium term Investments because most people who deposit money in banks

want their money back within one to five years finally there are no reliable green financial policy frameworks at present many policy frameworks do not provide any incentives for financial institutions to invest in green projects all this is made more difficult with many policy frameworks still

providing fossil fuel subsidies ok ok we got technology risk not enough information maturity mismatch do you know if there’s any solutions to overcome these challenges yes there’s a lot but here are some of the more widely accepted ones for tackling technology risks the most common

solution is to simply invest more resources into researching developing and improving green technologies another solution is to focus more on funding small and medium-sized green projects this reduces the cost of any individual failure and helps that green projects more frequently a solution to

insufficient information is for businesses and governments to disclose more information about the success and failures of their green projects not only will this help reduce financial risks but also minimize the chances of repeating mistakes or wasting resources in reinventing the wheel to help

with this you have platforms such as the green Finance platform which has a global network of countries organizations and experts who are looking to address knowledge gaps in

green Finance moving on to the maturity mismatch issue research suggests that Insurance companies and pension funds can help scale up green

Investments these funds prioritize making medium to long-term Investments unlike bank deposits many people who invest in pension fund schemes are not looking for a financial return for at least a few decades plus for every dollar that is invested in clean energy

today it could generate three dollars in future fuel Savings by 2050. finally central banks and governments need to work together to develop reliable green financial policy frameworks central banks have regulatory oversight over money Credit and the financial

system therefore this helps them easily understand the risks associated with different green investment models and projects central banks can use this information to support the government and develop a green financial policy framework that is suitable for their city or country let’s recap we

learned what is green financing and looked at examples of green financing instruments there are four major challenges that play green financing from becoming mainstream we looked at examples of innovative solutions that can be used to overcome the challenges in green financing thanks for watching

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