Filling the R & A gap with private sector investments – Green Bonds Case Study

19:00 Tuesday 28 May




Heidi Tuhkanen (Finland) 1; Aaron Maltais (Sweden) 1

1 – Stockholm Environment Institute

The Paris Agreement agreed by 195 countries at the UN climate change conference in 2015 sets clear aspirations to limit global warming to between 1.5 and 2 degrees Celsius. Alongside mitigation, the agreement also highlights the adaptation goal and support for resilience, which is an interrelated but less clearly defined concept. There is consensus that the private sector must to be involved in investments in order to succeed in the multiple goals: mitigation, adaptation and/or resilience. Indeed, as financiers and asset owners, the private sector has a strong role to play. For example, global infrastructure investment needs alone for the low carbon and climate-resilient (LCCR) pathway were estimated to be a total of USD 90 trillion between 2014-2029. Because adaptation receives much less funding than mitigation, the Paris Agreement also calls for a balancing in the financing between these two goals. As the funding needed exceeds the public sector financing capacities, there has been a call for strong private sector involvement in filling the gap in climate finance. As Green Bonds have been promoted as a financial vehicle for channeling private investor funding into the much needed even for adaptation and resilience (A & R) investments, this research uses Green Bonds as a case study to explore private sector contribution to funding of A & R.

Through a desk study this research deconstructs the different potential roles of the private sector in A & R investments, examines the definition of resilience as used in the financial sector, and assesses A & R funding needs with the past A & R funding through Green Bonds. A critical look at green bonds and the state of play indicates that the potential for the private sector to currently use this tool as an investment vehicle is limited. Based on the analysis, recommendations are made to better align the Green Bonds funding with the A & R needs.