Green Finance: Leveraging Investment for Environmental Protection

• Date: 01 May 2018

5-2018 NEWS & ANALYSIS 48 ELR 10367

D I A L O G U E

Green Finance: Leveraging

Investment for Environmental

Protection

Summary

Some political narratives describe the relationship between

environmental protection and economic growth as two

inherently incompatible goals. As the global community

turns its attention to implementing international climate

agreements, this story is ceding ground to the realization

that the economy must facilitate a transition to sustain-

ability. With limited government funding available, private

investments oer an opportunity to dramatically increase

and leverage funding to address daunting environmental

problems. Green nancing will play a critical role in the

shift to a green economy.

Governments, intergovernmental organizations,

nancial institutions, corporations, and nongovernmen-

tal organizations (NGOs) are examining green nanc-

ing mechanisms in earnest. Fina ncial institutions are

enabling investment in green infrastructure, and many

have signed on to the E quator Principles, a risk manage-

ment framework for determining, assessing, and manag-

ing environmenta l and social risk in projects. NGOs and

governments are promoting public policies that encour-

age investments in sustainabil ity, a nd developing public

and private mechanisms to facilitate investments in envi-

ronmentally benecial projects, such as t he Paris Cli mate

Agreement's Green Climate Fund. With target s including

pollution control, biodiversit y protection, a nd materials

management, as well as investments directly related to

decreasing reliance on fossil fuels, the impacts of green

nancing could reshape the landscape for environmental

professions. On June 6, 2017, ELI held a public seminar to

present recent developments in this eld. Below we pres-

ent a transcript of the d iscussion, which has been edited

for style, cla rity, and space considerat ions.

Michael Gerrard (moderator) is Director of the Sabin

Center for Climate Change Law at Columbia Law School.

Charles E. Di Leva is a Visiting Scholar at the Environmental

Law Institute.

John Rousakis is Counsel for O’Melveny & Myers LLP.

Douglass Sims is Director of Strateg y & Finance at the

Natural Resources Defense Council’s Center for Market

Innovation.

Michael Gerrard: As is going to become abundantly clear,

there is no one standard denition of “green nance” in

terms of what’s included or not. So, I’m going to talk about

nance that is directly related to climate change mitigation

and adaptation. In particular, what is it that will ultimately

need to be paid for?

And so, of course, we start with mitigation a nd green-

house gas emissions reductions—which is mostly migrat-

ing away from fossil fuels. at involves eorts to minimize

energy use through a number of energ y-eciency mea-

sures, and eorts to decarbonize the electric power supply

to move from fossil fuels toward clean sources of elec-

tricity like wind, solar, hydro, geothermal, and possibly

nuclear—although that’s a dierent debate. It also involves

electrifying the vehicle eet and converting space heating,

space cooling, and water heating away from fossil fuels to

electricity. A ll of that means t hat we essentially need to

eventually double the supply of electricity, a nd a ll of the

electricity needs to come from clean sources. Doing that

will be enormously expensive. at is one of the important

elements of green nance, paying for t his massive decar-

bonization eort.

We also know that even if we were making our best

eorts, there would be a lot of climate change happening.

erefore, a lot of adaptation would be needed. at’s cop-

ing with the unstoppable climate change that will occur.

An enormous number of activities will be needed to pro-

tect properties that are vulnerable to coastal hazards and

to other climate-related problems, for example by putting

buildings on stilts or retreating from the coastline or a vari-

ety of other methods that are needed for adaptation. In

many parts of the country, the water supply s ystem will

need to be recongured. Many agricultural systems are

going to need to be changed. Lots of other things are going

to have to be done as well.

Not included in any of these are losses that will occur

as a result of property destruction and lost productivity

from climate change. But this is not monetized. It’s not

subject to green na nce because really nobody pays for it,

except sometimes insurance companies. Otherwise, these

are just economic losses. In the ideal world, we, the devel-

oped world, would also be helping the developing coun-

tries cope with the losses that they will inevitably suer as

a result of climate change due largely to our greenhouse gas

Copyright © 2018 Environmental Law Institute®, Washington, DC. Reprinted with permission from ELR®, http://www.eli.org, 1-800-433-5120.