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23 - Financing the Transition

from Addressing Barriers io Change

Published online by Cambridge University Press:  08 October 2021

By
Michael H. Smith ,
Pablo Berrutti ,
Nathan Fabian  and
Nicolette Boele
Edited by
Kenneth G. H. Baldwin ,
Mark Howden ,
Michael H. Smith ,
Karen Hussey  and
Peter J. Dawson
Kenneth G. H. Baldwin
Affiliation:
Australian National University, Canberra
Mark Howden
Affiliation:
Australian National University, Canberra
Michael H. Smith
Affiliation:
Australian National University, Canberra
Karen Hussey
Affiliation:
University of Queensland
Peter J. Dawson
Affiliation:
P. J. Dawson & Associates
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Summary

The availability of finance is a key requirement for action to mitigate and adapt to climate change. Several studies show that companies responding to ESG (environement, sustainability and governance) principles generally outperform others financially. There is strong growth of the sustainable finance sub-sector but off a low base. Fiduciary duty now is generally understood to include the need to take into account climate chage in decision-making and the exposure of company directors is growing exponentially. With falling prices, renewables are now being adopted by many leading companies for their own energy requirements. Green bonds and other climate-friendly financial instruments are in growing demand but large global financial institutions continue to direct a larger proportion of funds to fossil fuels than to ESG-rated investments including renewables. The present rate of growth of sustainable finance is not sufficient to meet climate goals for limiting emissions. The chapter recommends actions by governments to change this situation.

Keywords

climate bondsfiduciary dutygovernancegreen bonds
Type
Chapter
Information
Transitioning to a Prosperous, Resilient and Carbon-Free Economy
A Guide for Decision-Makers
 , pp. 621 - 645
Publisher: Cambridge University Press
Print publication year: 2021

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