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    Stimulating Non-Bank Financial Institutions' Participation in Green Investments

    Gianfrate, Gianfranco; Lorenzato, Gianni | August 2018
    Abstract
    This paper analyzes the approaches adopted by institutional investors to manage climate risk in their portfolios and proposes policies to increase climate awareness in this large segment of the capital markets. Because of their size and their role as conduit of savers’ climate concerns to the capital markets, most non-bank financial institutions are ideally positioned to steer corporate capital allocation toward more sustainable uses. Over the past decades, an increasing number of institutional investors have adopted strategies to mitigate climate exposure. These include negative screening, positive screening, active ownership, sustainability ratings, and hedging of climate risks. These strategies reflect specific fund manager mandates and the recognition that climate risks can have a tangible impact on financial assets’ valuations and, as a result, institutional fund performance. We review the evidence about the adoption of these strategies, in both advanced and developing capital markets. We then analyze the pros and cons of each strategy in promoting more sustainable climate practices and identify best practices. We conclude with policy recommendations for capital markets regulators to incentivize the adoption of sustainable practices among institutional investors.
    Citation
    Gianfrate, Gianfranco; Lorenzato, Gianni. 2018. Stimulating Non-Bank Financial Institutions' Participation in Green Investments. © Asian Development Bank Institute. http://hdl.handle.net/11540/8639.
    Keywords
    Climate
    Climate change
    Climate impacts assessment
    Global climate change
    Asian Development Bank
    Development
    Regional Economic Integration
    Financial Sector Policies
    Financial Risk Management
    Bond Financing
    Climatic change
    Climatic influence
    Climatology
    Investment bank
    Investment policy
    Capital Market
    Regional Plans
    Regional Development Bank
    Development finance
    Municipal Bonds
    City planning
    Urban climatology
    Bank investment
    Capital investment
    Investment banking
    Venture capital
    Local government bonds
    Bonds
    Catastrophe bonds
    Bond funds
    Bond market
    Multilateral development banks
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    Citable URI
    http://hdl.handle.net/11540/8639
    Metadata
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    adbi-wp860.pdf (402.5Kb)
    Author
    Gianfrate, Gianfranco
    Lorenzato, Gianni
    Theme
    Climate
    Finance
     
    Copyright 2016-2021 Asian Development Bank Institute, except as explicitly marked otherwise
    Copyright 2016-2021 Asian Development Bank Institute, except as explicitly marked otherwise