WP2 - Climate Finance Governance

Activating and scaling-up climate finance will be key for solving the climate problem. Many adaptation and low-carbon investments are capital intensive, yet finance for these is currently highly constrained and often perceived as a key barrier to adaptation and mitigation. At the same time, there is a growing market of ‘impact investment,’ which are investments that contribute to social and sustainability goals (e.g. green bonds, etc.).

Work Package 2 (WP2) of GREEN-WIN will explore some of the key financial barriers and opportunities to activate and scale up climate finance. It will examine the structural issues underpinning the orientation of public, “institutional” and more traditional forms of market finance. It examines what factors bias finance towards short-termism. It then considers developments in governance and policy packages that could help reorient finance from less to more sustainable investments. In particular, WP2 will focus on three pillars:

  • A comparative analysis of the finance assets for climate action and sustainable development, and governance thereof, in key G20 countries (US, China and few EU countries). This analysis provides a detailed picture of how much different financial instruments, and wider governance of financial systems, can be expected to drive climate and sustainability investments;
  • An assessment of targeted climate finance approaches with mainstreamed climate finance in terms of their comprehensiveness, their global climate impacts, their synergies and trade-offs. This task will explore the consistency of climate finance tools and specific approaches of ‘mainstream’ finance and regulations that may be either counterproductive or constitute a significant lever;
  • The design of integrated policy packages which support economic progress whilst respecting distributional concerns and enhancing sustainability. A key methodological tool will be development of stylised models of relative rates of return, multiplier, leverage, and co-benefit/spillover effects in the different domains for key sectors, in order to include the financial sector in modeling analyses.

To advance the transdisciplinary understanding between finance sector and sustainability, WP2 includes a leading academic institution (UCL) and a multi-stakeholder think-tank (2° Investing Initiative), to build a scientific community focused on the sustainability of the financial system as well as on the integration of climate constraints in financial institutions’ investment strategies and financial regulation.

GREEN-WIN develops, as a particular theme, the cross-cutting role of finance – including key characteristics of current financial systems in relation to sustainable investments, how specific features of underlying sectors affect the ability to attract finance for win-win strategies, and the potential to transform finance systems themselves to better reflect and integrate climate and sustainability goals.