Time for Green Quantitative Easing

Policy Lever: Harnessing Public Balance Sheets

Goverments are using their public balance sheets to provide fiscal incentives, risk guarantees or public investment in ways that improve the risk adjusted returns of green investment and seek to 'crowd-in' private investors.  Incentivizing sustainable finance through the use of the public balance sheet has been a feature in every country reviewed by the Inquiry.

Examples

Steps that can be taken to develop new green investment incentives, or to align existing incentives to sustainable development include: 
  • Target fiscal support: Establishing and optimising fiscal incentives to mobilize private capital for green investment.
  • Review fiscal incentives: Reviewing the alignment of existing fiscal incentives for savings, investment, lending and insurance with sustainability.
  • Sustainability mandates of public financial institutions: Strengthening sustainability as part of the mission and operation of development finance institutions and sovereign wealth funds.
  • Establish new green institutions: Launching new green investment banks and funds.
  • Blended finance instruments: Developing and using financial instruments designed to share risks and overcome barriers to private investment (such as through risk underwriting & results based financing).
  • Central banks refinancing operations: Extending refinancing operations to include green assets.
  • Central bank asset purchase programmes: Incorporating sustainability factors into asset purchase programmes.
  • Public procurement criteria: Introducing sustainable development performance into procurement of financial services by the public sector.

 Impacts

These measures are widely adopted and can be effective, but the scale of new funding available is limited. Nevertheless the financial system is already the recipient of, and conduit for, significant public financial support, which has the potential to be aligned to sustainable development.      

Inquiry Publications

  • Scaling up Green Bond Market for Sustainable Development

    Date: 09-Dec-2015

    This guide argues that with the right support in place USD 1 trillion of green bonds could be issued a year by 2020 – providing a significant contribution to closing the investment gap for climate-friendly infrastructure in both developed economies and emerging markets. It argues for several sets of policy actions to support and enable the green

  • Central Banks Can and Should Do Their Part in Funding Sustainability

    Date: 10-Jun-2014

    In this paper Andrew Sheng argues that central banks, when purchasing financial assets, should consider selecting assets that will promote sustainability, including climate change mitigation and adaptation. Social impact investing he argues is consistent with a central bank’s mandate to maintain price stability. They could incentivize bankers and asset managers to invest in, or lend to, climate mitigation activities and low-emission

  • Aligning the Financial System with Sustainable Development in the United States of America

    Date: 01-Feb-2016

    The US financial system is undoubtedly among the largest, most innovative and most sophisticated in the world. It is also clear that this is both a benefit and an impediment to non-governmental investment in sustainability and inclusiveness. To date, the actual investment in infrastructure and sustainability does not meet current needs, especially those related to maintaining

  • China Green Finance Task Force Report: Green Bonds

    Date: 02-Apr-2015

    Green bonds provide a potential source of long-term funding for green loans which reduces the risk of maturity mismatch. This paper recommends that China should commence the pilot issuance of green bonds at the earliest possible date to support the green lending business of banks. Specific recommendations are: Create a clear standard to define the scope of investment

  • China Report: Greening China’s Bond Market

    Date: 06-Oct-2015

    This reports rovides an overview of the green bonds theme, innovative structures in the international market and potential application in China. A key message is that green finance, in addition to providing a green benefit, can assist in implementing and enforcing financial reforms that address imbalances in China’s financial system. Another message is that providing

  • Delivering The Green Economy Through Financial Policy

    Date: 07-May-2014

    This working paper was produced for the early stage of the Inquiry to provide an inital overview of the areas where the financial sector can have an impact on moving the green economy forward and the extent to which green financial policy is already actively being practiced. The paper is focused on financial regulation and the instruments of financial policy that

  • China Green Finance Task Force Report: Green Funds

    Date: 02-Apr-2015

    This paper sets out the case for promoting the development of green industry funds as public-private partnerships (PPPs) to use limited government funding to leverage private capital into green sectors. It is envisaged that green industry funds will serve as the platform through which private capital can converge into professionally managed green investments with government as one investment

  • Making the Jump

    Date: 29-Feb-2016

    This paper outlines the dynamics behind the financial regulatory paradigm shift that began in 2008-2009. It seeks to identify parallels with and differences from the slower moving, even more consequential, global climate change crisis, and the fitful, still under way, policy paradigm shift that the United Nations Environment Programme (UNEP) and other stakeholders are trying

  • China Green Finance Task Force Report: Green Banking System

    Date: 02-Apr-2015

    This paper sets out the case for establishing a green banking system in China. It recommends the establishment of a system of green banks empowered to fully leverage their expertise, scale, and risk management to manage green loans and investments. A China Ecological Development Bank should be established in which the government does not have to have a

  • China Green Finance Task Force Report: Development Banks

    Date: 02-Apr-2015

    China is supporting investment in developing countries through the BRICS Development Bank, the Asian Infrastructure Invesment Bank and the Silk Road Fund. It aims to draw upon the experiences and rules of other multilateral development agencies to ensure that this financing  encourages environmentally and socially responsible investment. The paper offers some recommendations on how the BRICS Development Bank, the AIIB and the

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