With growing concerns about escalating climate change across the world, so has the commitment of governments, financial institutions, and corporations to green finance initiatives that help mitigate environmental risks and promote sustainable economic growth. Green finance is the financing of instruments and investments in projects and activities that contribute positively to the environment, like renewable energy development, energy-efficient infrastructure, and carbon reduction activities
In the past few years, there has been a remarkable upsurge of green bonds—those whose proceeds must be dedicated to projects with a positive environmental impact. This growth evidences growing investor demand for sustainable investment opportunities and changing mindsets toward mainstreaming environmental factors into financial decision-making processes.
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Of the global initiatives, the aim of the Paris Agreement is to limit global warming to well below 2 degrees Celsius and achieve net-zero emissions by mid-century. Against the backdrop of such ambitious targets, many governments around the world are adopting policies designed to encourage green investments, from tax breaks for renewable energy projects to subsidies for electric vehicles. Green finance development can also be driven by financial institutions via the development of sustainability frameworks and disclosure of climate-related risks that go hand in hand with the integration of ESG criteria into strategies for investing. It helps to align financial flows with sustainable development objectives and promotes responsible stewardship over natural resources. The imperative to accelerate green finance initiatives has never been greater—to match the trail of climate change impacts, from extreme weather events to biodiversity loss and resource scarcity.
Undeniably, stakeholders from all sectors acknowledge the dual role of addressing climate risks while unlocking new economic opportunities through innovation and sustainable growth. Unless regulatory and investor pressures couple or are coupled with technological innovation working to the advantage of clean energy and environmental preservation, the momentum of green finance will likely prevail. Bringing together relevant stakeholders and capital for collaboration in making a low-carbon economy a possibility is discussed in this paper.
