The transformative power of green finance
22 April 2022
Brian Haugh, Head of BDO Valuation & Financial Modelling Centre featured in The Irish Times Special Report on Green Finance.
When sustainable investing in major markets was worth $30 trillion in 2018, it was expected that in order to meet the goal of limiting the global temperature increase to 1.5 degrees by 2030, the figure would need to reach $90 trillion. That has been comfortably surpassed, as shown by a recent announcement from former Bank of England governor Mark Carney at Cop26.
He said that $130 trillion of assets “aligned with the Paris Agreement” are available from 450 companies that are members of the Glasgow Financial Alliance for Net Zero (GFANZ) private finance initiative.
With this remarkable growth in mind, what is green finance exactly and what are the opportunities it holds for the Irish financial services sector?
What it means
Green finance can refer to any funding that is provided to an environmentally sustainable project or activity, says Brian. “The biggest area of focus for green finance has been the funding of projects that seek to reduce or eliminate the amount of greenhouse gases emitted into the atmosphere, such as renewable energy, reduced energy use, reduced emission fuel, and carbon-capture projects.”
“It can also take the form of preferential ‘green rates’ for lending to organisations that engage in environmentally friendly practices such as building houses to high environmental standards.” He says that green finance has the potential to be one of the most effective tools deployed to fight climate change as it specifically targets areas that will reduce the amount of the greenhouse gases, which are responsible for rising temperatures released into the atmosphere.
A healthy future
Brian adds that Irish financial institutions are already capitalising on investor appetite for Green Bonds, which provide funding exclusively for activities that have a positive environmental impact, and utilising these funds to finance projects and businesses to reduce emissions. “There’s unlikely to be any shortage of demand for green finance in Ireland in the coming years, with an estimated €125 billion required by 2030 to deliver on Ireland’s Climate Action Plan, the majority of which is expected to be funded by the private sector.”
Content adapted from The Irish Times.