11. Assessing the Quality of Green Finance Standards

Abstract

X. Liang and Z. Gao in Chapter 11 argue that climate change is one of the greatest challenges that humans are facing in this century. Mobilising investment and finance in addressing climate issues is key to unlocking actions on climate change across countries. The estimated investment required to achieve the climate mitigation goal established in the Paris Agreement ranges from US$1.6 trillion to US$3.8 trillion annually from 2016 to 2050, while the tracked annual flow of climate finance is US$579 billion on average. Despite significant growth in climate finance flows, the gap remains substantial. In response to the gap, an issue that must be urgently addressed is maximising the effectiveness of climate investment and finance. Developing Green Finance, such as green bonds, green funds, or green loans, has provided hope for a potential solution to bridge the climate change funding gap. Since the first green bonds were issued in 2007 by the European Investment Bank (EIB), the green financial market has grown rapidly in both scale and market coverage. Green bonds remain the dominant asset in terms of market share. In 2021, green, social, sustainability, sustainability-linked, and transition-themed debt reached US$1 trillion with growth spearheaded by green bond issuance. This represents a twenty-fold increase from 2015, and accounts for 10% of the global debt markets.