Green Trends in the Global Financial System

1473
DOI: 10.20542/0131-2227-2016-60-9-5-16
B. Porfir’ev, Institute of Economic Forecasting, Russian Academy of Sciences (INP RAN), 47, Nakhimovskii Prosp., Moscow, 117418, Russian Federation (b_porfiriev@mail.ru

Acknowledgements. The article has been supported by a grant of the Russian Foundation for Humanities (Project 15-02-00411 “Modernization of technology intensive industries within the green growth framework”). 


Abstract. The paper attempts to consider comprehensively the emerging phenomenon of green financing and its major components. It is argued that these are a part of structural change within the existing global financial system; however, it would be too early to consider green finance an established subsystem of this system. Environmental and climate change have been producing a significant and ever increasing impact on the development pace and structure of both industrial and financial sectors of economy at the global, regional and national levels. Within this context the causes and substance of increasing devaluation of the fossil fuel assets’ issue and its significance to the economy of Russia are disclosed. As a major policy of handling this issue of stranded assets the development of renewable energy, energy efficient and clean technologies is emphasized and the issues of financing this green development path are considered in depth. Contemplated are different definitions of green finance with green investments making up a core. Critical analysis of interpretation of green finance as a new driver of the world economic development is provided. Traditional and innovative financial tools of green investment, in particular green bonds, Yieldcos, asset backed securities (ABS) are discussed. It is argued that so-called climate finance make up a major and ever more important component of the financial sector of the green economy. Climate finance makes a key and increasing contribution to the renewables projects’ development. Traditional loans supported by tax credits directly input to growing green investments while the new tools of debt financing and securities above stimulate financial flows into this new area providing risk hedging. It is argued that development of green finance as a major policy component within the new international climate treaty, Paris Agreement, should go hand in hand and be highly interconnected with implementation of the updated and expanded Sustainable Development Goals. If successfully achieved the output should make up a core element of the new global strategy and turn 2015 (when both documents were adopted) from a bifurcation to a turning point and stepping stone of the long-term sustainable development path.

Keywords: environmental issues, climate risks, stranded assets, green finance, climate finance, green investment, financial innovations, green bonds, ABS, Yieldco, carbon trading, carbon taxes, sustainable development 


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For citation:
Porfirev B. Green Trends in the Global Financial System. World Eonomy and International Relations, 2016, vol. 60, No 9, pp. 5-16. https://doi.org/10.20542/0131-2227-2016-60-9-5-16



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