Climate Change and Green Finance in Emerging Market Economies: The Open Economy Dimension

Bortz, Pablo Gabriel and Toftum, Nicole (2020): Climate Change and Green Finance in Emerging Market Economies: The Open Economy Dimension.

Abstract

The paper reviews the alternatives available to Emerging Market Economies (EMEs) to finance investment required to mitigate and adapt to climate change. It also takes into account the financial needs to achieve the Sustainable Development Goals (SDGs). Since the requirements dwarfs the financial capabilities of the public sector in EMEs, the paper explores possible funding channels focusing on international financial markets. The paper identifies potential obstacles to a smooth and sustainable finance provision, including the influence of the global financial cycle on credit supply, risks related to currency mismatch and creditworthiness assessment, and mispricing of risks. The review also identifies the challenges to the exporting profile and therefore the sustainability of the balance of payments of EMEs. Finally, the paper provides some reflections on the limits of domestic private capital markets to bridge the “environmental financial gap”, and calls for the deeper involvement of specialized and official financial institutions.

• Item Type: MPRA Paper
• Language: English
• Keywords: Climate Change, Sustainable Development Goals, Financial requirements, international capital markets, green bonds, sustainable finance
• Subjects: E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy; F - International Economics > F6 - Economic Impacts of Globalization > F64 - Environment; G - Financial Economics > G2 - Financial Institutions and Services > G23 - Non-bank Financial Institutions ; Financial Instruments ; Institutional Investors; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O13 - Agriculture ; Natural Resources ; Energy ; Environment ; Other Primary Products; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q58 - Government Policy

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