Green financing has a critical role to play in working towards net-zero and in the fight against climate change.
But what exactly is it, and why is it so important?
The Climate Change Committee estimates that the
Green financing has a critical role to play in working towards net-zero and in the fight against climate change. And as we begin to recover from the pandemic, green finance presents a huge opportunity to build back with a greener future, creating new businesses and jobs.
Green financing explained in 60 seconds
What exactly is green financing?
Simply, green financing is a loan or investment that supports environmentally-friendly activity, such as purchasing environmentally-friendly goods and services or building environmentally-friendly infrastructure.
Making the necessary lifestyle and business changes to become greener can be expensive, so green financing can often include incentives that make it easier to deal with the cost of switching to electric vehicles or improving the energy efficiency of your home, for example. So it can help people and businesses make good purchasing and investment decisions for both themselves and the environment.
Green finance has well and truly entered the mainstream. As risks associated with environmentally-damaging products and services increase, over time we can expect purchasing and investing in green alternatives to become the norm.
Banks are increasingly making more green finance available and accessible to fund green projects such as wind and solar farms, and to invest in businesses themselves to help them become greener. Banks therefore play an essential role in helping people and businesses to access the money to support environmentally-friendly activity.
The importance of green financing in supporting the transition to a low carbon economy has been recognised by the upcoming
Why is climate finance being covered at
Mobilising finance is one of four key goals at
At present, globally, we are not on track to meet these goals. One of the greatest challenges we face is a lack of financing to fund the solutions for a low carbon future.
Global collaboration is required as the countries who are poorest or most vulnerable to climate change, such as small island nations, need a helping hand. With
What's the difference between climate finance and green finance?
Climate finance, as will be discussed in
Why is green financing important?
In a nutshell, green finance can provide economic and environmental benefits to all, and needs to be managed to ensure there is a just transition to a low carbon society.
Socially, green financing expands the number of individuals and businesses who can gain access to environmentally-friendly goods and services, especially for the vulnerable and marginalised. This makes the transition to a low carbon society more equal, creating more socially inclusive growth.
It means more money is invested into businesses to help them become greener. This can help businesses to grow, creating jobs, reducing carbon emissions and stimulating the economy, creating a 'great green multiplier' effect where both the economy and environment continuously benefit. A win-win for everyone.
The Great Green Multiplier Circular graphic showing the following cycle: 1. We provide finance for companies to produce/invest in greener products, services and practices using innovative solutions 2. We help people - through loans and credit - to make the right purchases for them and the environment 3. Increased demand for 'green' goods fuels sustainable growth 4. Creating more jobs, more economic activity and more prosperity 5. Good for the planet, good for business and good for the economy 6. More lending and further growth
At
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