This working paper was produced for the early stage of the UN Environment Inquiry to provide an initial 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 practised.
Delivering the Green Economy through Financial Policy is focused on financial regulation and the instruments of financial policy that apply to the financial sector. The financial sector plays a valuable financial intermediation role and is the source of capital needed for economic growth, but in a market economy, capital allocations will be dictated by risk-return considerations in the real sector. The financial sector can react to real sector opportunities, but it generally cannot create such opportunities in any sustained manner. The paper maps out the financial regulatory landscape and lays out the functions that different Financial Initiatives fulfil. It looks at regulatory mechanisms that operate via financial markets to influence investment behaviour and concludes with some open questions that warrant discussion and further study.