” Those who leave in glass houses should not throw stones ” Old Proverb
Climate change is factual. We need to become more conscious of the environment and ensure it is protected. Not to my surprise more and more investors, would like to see their investments producing not only financial returns but also seeing them contributing to a more sustainable society and a greener future for their children. Naturally, green finance is taking off.
The most broad definition about green finance is perhaps funding any means of reducing carbon emissions or rising resource efficiency. There are different shapes and forms of green finance: green bonds, funds and other common investment vehicles that provide capital to projects reducing fossil fuel consumption, common stock of companies that work towards reducing carbon emissions ( good example can be Beyon Meat), loans to governments or other institutions that finance environmentally sustainable projects.
This is a question hard to answer. The market size depends on which instruments we count as part of the green finance market. Factually, green bonds issuance has been consistently growing over the last 5 years to reach 580 bln USD in 2018 according to Bloomberg New Energy finance. In Europe alone about 180 bln EUR of green financing is needed in the next couple of years according to this European Commission statement. Should we look beyond the bond market some estimates suggest that the green finance market has already exceeded 12 trln USD. The Green Finance Initiative, a City of London group promoting green finance has got interesting facts and figures section on their website explaining further the depth of the market.
Certifying green finance instruments is more complex than it seems. Naturally, in various geographies there are various definitions on what is green finance. For the time, being there is no common global standard. However, there is some guidance that is generally agreed upon, for example the International Capital Markets association has issued Green Bond Principles that provide a solid base for many. At the same time the EU Commission has directed an expert group to create a green bond standard. Additionally, there are a number of private companies that have made their mission to provide data and analytics about green finance. Some of the names that can help you understand whether a given financial instrument is green are Sustainalitycs an Amsterdam based company that produces research and delivers analytics on ESG, Vigeo Eiris a Paris based environment rating and research agency, as well as Cicero Shades of Green a specific unit of the Norwegian climate research institute.
The avenues are very much the same as for traditional investment products. Your bank in many cases can help you purchase a green bond, a green fund or a share in a listed “green” company. As common environmental consciousness rises, there are a lot of crowd funding platforms that you can use to fund green projects. For example, the oceancleanup system001 was crowdfunded. Here you can find the 10 most popular crowdfunding websites can be found here. Additionally, there are number of niche investment platforms that can be used to invest in green projects. Here you can find eight of them. Please remember that as with any investment, allocating some of your funds to green finance does carry a form of risk associated with it.
Investing in greener companies can outperform investing in other more conventional companies, a report from Morgan Stanley wealth management found. Growing investor demand and not much availability can also help driving secondary market prices. It also looks like that some countries are looking to offer lucrative tax incentives to green finance investors in order to boost their efforts fight climate change and reduce their carbon impact. Here are couple of examples.
Green finance is one of the solid instruments that can help us foster a better future for both ourselves and our kids. Non protecting the environment and over consuming have resulted in serious consequences to the environment, for example the Great Pacific Garbage Patch covers an area which is an estimated 1.6 mln km sq, visible from space and roughly three times the size of France and coal fired power plants have contributed to lung disease and some forms of cancer across multiple countries and geographies. Green finance instruments give us the opportunity to both improve our financial fortunes, and help make the world a better place. Please like, comment and share so that more people can learn how we can make a big difference together.
Boris Grozev is a seasoned fintech executive. Entrepreneur by heart Boris has helped number of businesses to create and implement business development and product strategies. His advisory work in Emerging and Frontier markets has promoted culture and technology change, fostered innovation and lead to tangible results. He invests in variety of asset classes. Boris is a fast learner, whose leadership abilities, ambition, stamina, passion to succeed and attitude naturally spread to others helping to achieve common goals