April 22, 2024

Green finance: navigating the future of sustainable investment

Green finance has become a new buzz phrase; an economic lever to help drive environmental solutions that address the climate crisis.

Here in Scotland, it’s an idea already being put into practise, with initiatives like the Facility for Investment Ready in Nature in Scotland (FIRNS) programme, funded by the Scottish Government and NatureScot.

But can financial markets be used to foster environmental progress?

From climate to green

First let’s look at where green finance came from.

A strong driver has been awareness of climate change. Financial products like green bonds and funds emerged as ways to fund climate mitigation.

In 2007, the European Investment Bank (EIB) issued its first green bonds and these provided a model for financing environmental projects.

This led to the development of other green financial instruments across the world and the establishment of the green bond principles, a set of voluntary guidelines for issuing green bonds, by the International Capital Market Association, in 2014.

The green bond principles, focusing on the use of funds, project selection and reporting outcomes, have helped standardise green bonds and boost investor confidence in them, leading to the market’s expansion.

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