Financing inclusive green growth through international capital markets

Official development assistance and other official flows are insufficient for financing inclusive green growth. Private and institutional investors are quite reluctant to invest in green financial products due to various financing constraints. This research projects, therefore, studies ways to overcome these financing constraints. The focus lays on possibilities to mobilise private and institutional capital through international capital markets for green and sustainable investments in developing countries and emerging economies.

Project Lead:
Peter Wolff

Project Team:
Nannette Lindenberg

Financing:
The Federal Ministry for Economic Cooperation and Development (BMZ)

Time Frame:
2013 - 2014 / completed

Project description

Investments for growth and development have to be as green and sustainable as possible in the future to prevent an even greater rise in temperature and adapt to the new climatic conditions. Therefore, first of all huge investments in green infrastructure in developed and developing countries will be necessary in the coming years. But, state budgets - and thus official development assistance and other official flows - will be unable to provide such sums of money.

On the other hand, private and institutional investors (such as pension funds, insurance companies and sovereign wealth funds) do have the necessary capital to finance a green transformation, as they manage assets worth several trillion US dollars and, unlike commercial banks, have a definite interest in long-term investments. Unfortunately, however, the sustainable investment activities of these investors are negligible, particularly for investments in developing countries and emerging economies. The reasons for this are straightforward: as subsidies for fossil fuels remain high, green investments appear unnecessary and unprofitable. Moreover, these groups of investors consider the risks of sustainable capital investments to be too high.

One solution to this dilemma is to alleviate the impact of disincentives and to provide positive incentives through the targeted use of public funds, i.e. through structured funds or guaranties. In this way, public donors and development-financing institutions can motivate private and institutional investors to inject capital into green investment products. So far, however, we do not know a great deal about mobilising private and/or institutional capital for sustainable investments. This research project, therefore, analyses ways to overcome the constraints to financing inclusive green growth.

Among other things the projects supports the G20 Dialogue Platform for Inclusive Green Investments with background research on the question what governments can do to effectively facilitate the mobilisation of capital for green investments in developing countries and emerging economies.

Publications

Events

Project Coordination

Anette Koehler-Rahm

Current Publications

The impact of Brexit for developing countries

Olekseyuk, Zoryana / Clara Brandi
The Current Column of 15 January 2019

Ukraine's unconsidered losses from the annexation of Crimea: what should we account for in the DCFTA forecasts?

Olekseyuk, Zoryana / Hannah Schürenberg-Frosch
Externe Publikationen of 14 January 2019

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