The Financial Geography of Green Finance Policy: Evaluating Policy Effectiveness across over 50 countries

In the past decade, over 390 finance policy initiatives aimed at greening the financial sector have been spearheaded by various public authorities around the world. So far, scholarship has offered insights into how traditional environmental policy such as carbon taxes, emission trading schemes, or low carbon R&D subsidies impact green financing, innovation, and financial performance. However, we still know surprisingly little about the impact of green finance policies on the real economy and the financial sector itself. In particular, we run major knowledge and policy deficits in managing climate risks in primary capital markets. Furthermore, we still have a limited understanding of the effectiveness of green finance measures and how they interact with other existing environmental policy regimes across countries; particularly how they might be undercut by subsidy regimes towards emissions-intensive industries that governments pursue in parallel.

We address this gap by conducting an in-depth mapping of green finance policies and traditional environmental policy instruments across more than 50 countries. We propose to quantitatively analyse the impact of extant green finance policies in shifting capital towards green solutions and away from emission-intensive activities. These objectives will be achieved via a three-pronged approach:

  • Analyzing the largest datasets on sustainable finance policy initiatives and instruments,
  • Interviewing NGFS members, and
  • Analyzing a comprehensive global dataset of syndicated loans, equity, and bond issuances.

Our research seeks to inform and enhance the capacity of central banks and financial supervisors to implement effective green capital market policies that are well-adapted to broader policy and subsidy regimes. In addition, we will discuss the implications of more stringent capital market regulation for just transition outcomes.