Green Finance
Green Finance is a strategic approach to incorporate the financial sector in the transformation process towards low-carbon and resource-efficient economies, and in the context of adaptation to climate change.

Green finance refers to financial support for green growth.

• The environmental benefits include, for example, reductions in air, water and land pollution, reductions in greenhouse gas (GHG) emissions, improved energy efficiency while utilizing existing natural resources, as well as mitigation of and adaptation to climate change and their co-benefits.

• Green finance involves efforts to internalize environmental externalities and adjust risk perceptions in order to boost environmental friendly investments and reduce environmentally harmful ones.

• Green finance covers a wide range of financial institutions and asset classes, and includes both public and private finance. Green finance involves the effective management of environmental risks across the financial system.

• Green finance is a phenomenon that combines the word of finance and business with environmentally friendly behavior.

• Green finance can be expressed differently depending on the participant, and it may be led by financial incentives, a desire to preserve the planet, or a combination of both.

• Green finance is about avoiding the promotion of any business or activity that could be damaging to the environment now or for future generations.
Green Growth for Green Finance

• Green growth is defined as growth generated through the harmony between the economy and the environment.

• It aims to achieve the goal of a low-carbon economy.

• It strategically promotes green industry, including environmental pollution prevention projects and renewable energy development projects.

• Green growth is the solution to three current threats to the global economy:

– Climate change
– Energy constraints
– Financial crisis.

Key options to create an enabling environment for mobilizing private capital for green investment
• Provide strategic policy signals and frameworks
• Promote voluntary principles for green finance
• Expand learning networks for capacity building
• Support the development of local green bond markets
• Promote international collaboration to facilitate cross-border investment in green bonds:
• Encourage and facilitate knowledge sharing on environmental and financial risk
• Improve the measurement of green finance activities and their impacts

Over the past decade, various complementary financial sector options have emerged in many G20 countries, from both private and public actors, to support the development of green finance. These include:

• Voluntary principles for sustainable lending and investment,
• Enhanced environmental disclosure and governance requirements,
• Financial products such as green loans, green bonds, green infrastructure investment trusts, and green index products.
• International collaboration among central banks, finance ministries and regulators (focused in large part on knowledge sharing and capacity building).

Way forward
Green finance is part of a broader occurrence from the incorporation of various non-financial or ethical concerns onto the financial universe.

Generally green finance is considered as the financial support for green growth which reduces greenhouse gas emissions and air pollutant emissions significantly.

Green finance in agriculture, green buildings and other green projects should increase for the economic development of the country.

The challenge, before developing economies is to mainstream green finance so as to incorporate the environmental impact into commercial lending decisions while simultaneously balancing the needs of economic growth and social development. This will necessarily mean setting out on the journey of integrating financial system and sustainable development which has numerous goal-posts.