Green Finance

Definition

Green Finance denotes any financial markets and products (contracts) that explicitly reference and/or address environmental risk factors or variables, thereby crystallising monetary value for such externalities. The objective of green finance is to incentivize environmentally sustainable development

Examples

• local currency green bond markets

Issues and Challenges

• In many countries and markets, the lack of clarity as to what constitutes green finance activities and products (such as green loans and green bonds) can be an obstacle for investors, companies and banks seeking to identify opportunities for green investing
• The correct pricing and supervision of financial risks stemming from climate change (and other environmental impacts)

See Also

• Sustainable Finance
• Climate-Related Risk

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