This International Institute for Sustainable Development and the Finance Research Institute of the Development Research Centre, State Council of China, are collaborating on an exploration of policy options to support China in developing a “green financial system,” and to encourage such developments internationally. This paper highlights the findings from the first phase of this partnership.
The paper makes the case for financial policy and regulatory action in ensuring that financial institutions correctly value climate and broader green risks, and that financial regulators recongnise their role in ensuring that financial markets fulfil their underlying purpose of investing in the long term health of the real econom. In particular, the paper explores the need for investment in the green economy, including the current global green finance landscape, growth in developing country green finance, and China's leading role in this area; outlines six reasons in support of greening financial policies and regulations; explores what it would mean to green China's financial system; highlights international experience in the greening of financial systems; and concludes by exploring various barriers and potential for leapfrogging.