Climate proofing and green finance reforms

Today in Science Magazine, Jasper Verschuur, Prof Nicola Ranger and I argue that climate adaptation finance is not demonstrably achieving the desired outcome, which is climate risk reduction. https://lnkd.in/dJ4mrxaM We propose five policy reforms that will help shift the focus from inputs to outputs and outcomes: 1. Better local climate risk information, for example for infrastructure, agriculture and people. We need to know the baseline risk if we are to understand whether adaptation finance is shifting the dial. 2. More specific adaptation strategies. Too often there's a gulf between what's in countries' National Adaptation Plans and what ends up happening on the ground. 3. Realistic financing, which takes account of countries' fiscal situation and how it may be impacted by climate shocks; along with a shortened time-frame for international finance mobilization. 4. Much more capable adaptation project delivery, by building local capacity, including in crucial institutions like planning departments and public works. 5. Rigorous monitoring of adaptation delivery and its outcomes in terms of climate risk reduction. Sorting this out won't happen overnight, and we argue that a long-term perspective shouldn't detract from early action to manage climate impacts that are happening now. We're grateful for support from the Climate Compatible Growth #CCG programme.

Udaibir Das is Visiting Professor at the National Council of Applied Economic Research and a Senior Non-Resident Adviser at the Bank of England. Here he delves into China's recently concluded Third Plenum and offers a lucid view on where China is headed on the monetary and economic policy front. Since 1978, China has strived to mould its financial sector to meet macroeconomic, social welfare and stability objectives. Marked by below expectation results, China remains wary of fully embracing market reforms. The Third Plenum therefore focus on optimising governmental roles and ensuring effective regulation to preempt and mitigate market failures. Rebalancing the financial system from state dominance to a market-oriented ethos is ongoing. Success hinges on fostering a conducive environment for sustainable growth. Though not yet fully detailed as ‘reforms,’ initiatives, key Plenum takeaways outlined below are noteworthy. Promoting a private economy This is seen in market liberalisation initiatives such as simplifying the Qualified Foreign Institutional Investor programme and expanding the use of the Digital Yuan (e-CNY) for international transactions. These measures aim to draw global capital and integrate China into the global financial landscape. Green finance Green finance emerged as a central theme, with initiatives such as issuing green bonds, providing tax incentives for companies adopting sustainable practices and accelerating reforms in power and emission trading systems. They highlight China’s strategy to leverage finance for building climate resilience and sustainable development. Bridging the financial inclusion gap with SMEs Supporting SMEs emerged as a priority during the Plenum. The government established dedicated funds and credit support mechanisms to enhance SMEs’ access to financing. This focus on financial inclusion is pivotal for enabling smaller businesses to contribute to economic stability and growth. External and financial sector interactions China's exchange rate policy to enhance renminbi usage, remains intertwined with its financial sector. Current approaches necessitate capital controls and foreign exchange interventions, thus blunting impact of financial sector reforms. Managing China’s vast FX reserves require substantial financial resources and strategic planning to avoid exacerbating domestic liquidity or asset bubbles. China’s financial future Enforcing new regulatory frameworks, managing volatility and risks from increasing foreign investment are paramount. The audacious move to expand Digital Yuan and further liberalise capital markets raises questions about the system’s adaptability to transformative changes. The international community must carefully assess these developments and closely observe how China actualises the intent of the 20th National Congress and the Third Plenum. Full article is found here. https://lnkd.in/g7Kc9xbP #China

#ClimateonaPlate 7/30 𝐓𝐡𝐞 𝐛𝐮𝐬𝐢𝐧𝐞𝐬𝐬 𝐨𝐟 𝐬𝐮𝐬𝐭𝐚𝐢𝐧𝐚𝐛𝐢𝐥𝐢𝐭𝐲 𝐡𝐚𝐬 𝐭𝐨 𝐛𝐞 𝐬𝐮𝐬𝐭𝐚𝐢𝐧𝐚𝐛𝐥𝐞 𝐟𝐨𝐫 𝐢𝐭 𝐭𝐨 𝐛𝐞 𝐚𝐝𝐨𝐩𝐭𝐞𝐝 𝐚𝐭 𝐬𝐜𝐚𝐥𝐞. Let me illustrate that with an example: Most of us understand solar pumps as a farmer subsidy or at best India's transition to green energy. ☀️💦 But when we look closer we see something far more interesting: It's actually about math,and a business model where unit economics makes sense. In reality: It's a financial reform that manifests as a climate forward incentive. For decades, DISCOMs ( electricity distribution companies) have been carrying a quiet burden: - Buying power at ₹6–₹7/unit and supplying it to farmers at ₹0–₹1.5/unit( lets remember 1/5 of the electricity demand in India comes from the agricultural sector). This created annual losses running into thousands of crores. - Extending infrastructure to remote locations in ways that are capex intensive, high on maintenance and prone to breakdowns due to transformer overloads. This system is fragile and expensive, creating structural financial imbalances for Distribution companies. Solar pumps flip this fragile economics. And here's how: ⬇️ - A one time capex replaces 15-20 years of subsidy losses. - Asset payback happens in 3-5 years after which solar pumps are pure financial savings. - Reducing Agricultural load improves voltage levels, brings frequency stability and dramatically reduces transformer failures. - Every unit saved becomes a high-value industrial unit helping bring down cross-subsidy, lowering industrial tariffs, and make the state more competitive. And the result is : 𝐓𝐡𝐞 𝐬𝐚𝐦𝐞 𝐫𝐞𝐟𝐨𝐫𝐦 𝐭𝐡𝐚𝐭 𝐬𝐚𝐯𝐞𝐬 𝐃𝐈𝐒𝐂𝐎𝐌𝐬 𝐠𝐢𝐯𝐞𝐬 𝐟𝐚𝐫𝐦𝐞𝐫𝐬 𝐜𝐥𝐞𝐚𝐧𝐞𝐫, 𝐜𝐡𝐞𝐚𝐩𝐞𝐫, 𝐦𝐨𝐫𝐞 𝐫𝐞𝐥𝐢𝐚𝐛𝐥𝐞 𝐢𝐫𝐫𝐢𝐠𝐚𝐭𝐢𝐨𝐧. They get: • Zero fuel expense. • Predictable daytime irrigation ( don't need to plan their irrigation as per electricity availability) • Healthier soil and better crop planning. • Savings of ₹20,000–₹45,000 a year on fluctuating diesel costs. • The ability to grow higher-value crops with confidence. It’s cheaper, cleaner and more reliable.And it puts control back in the farmer’s hands. When a single intervention makes DISCOMs financially stronger and farmers economically stronger it’s not really a subsidy but sustainability in its best form. By installing 45,911 off-grid solar pumps in 30 days ( a milestone that's now submitted for a Guinness World Record) Maharashtra is leading the country as the No.1 state in deployment under the #PMKUSUM and #MTSKPY schemes Solar pumps aren’t a welfare scheme.They’re a structural reform — one of the biggest we’ve seen in India’s power sector in years. The #GreenEconomy is scalable,possible and sustainable when done right . CM Devendra Fadnavis, MSEDCL , lokesh chandra, IAS Abha Shukla, Gopal Kabra Umesh Balani Abhijeet Gan Dinesh Patidar

Insurance and Climate: From Risk to Resilience As we enter Climate Week in the UK, the spotlight rightly shines on action — and the insurance industry has a unique, urgent role to play. Climate change is not a future risk; it’s a now risk. From floods in Europe to wildfires in North America and droughts across Africa and Asia, we are seeing firsthand how climate extremes are reshaping economies, threatening livelihoods, and straining the social contract. The Insurance Industry: A Hidden Superpower for Climate Resilience The insurance sector has always been about protecting people, businesses, and communities — but our impact goes far beyond claim cheques. We are increasingly central to building resilience, enabling climate-smart finance, and protecting investments critical for sustainable development. Three key areas of opportunity stand out: 1. Resilience Before Relief: The Power of Pre-Agreed Disaster Risk Finance Traditional aid is reactive, slow, and uncertain. But pre-arranged, parametric risk financing — like sovereign catastrophe bonds, insurance-backed social protection, and regional risk pools — is proactive, fast, and reliable. It helps governments and communities respond within days, not months, protecting lives and livelihoods. These tools help shockproof economies by reducing the fiscal burden after a crisis, while making countries more attractive to investors who need certainty. Insurance becomes a bridge between humanitarian response and market-based resilience. 2. Closing the Climate Finance Protection Gap Despite growing awareness, the climate protection gap remains staggering. Only a fraction of climate-related losses are insured, especially in vulnerable countries. To unlock the trillions needed in climate finance, we must pair capital with risk insight. Insurers can help de-risk infrastructure projects, model long-term climate exposures, and embed adaptation incentives in the design of sustainable finance — making sure green investment is not just ambitious, but resilient. 3. From Risk Takers to Risk Advisors The insurance industry is uniquely positioned to act as trusted advisors to governments, cities, and investors, helping to anticipate future risk and hardwire resilience into decisions. Our expertise in underwriting, modelling, and investment must be fully integrated into public-private climate strategy. The climate crisis isn’t just a scientific or political issue. It’s a risk management challenge at a global scale — and we know risk. We need to deepen partnerships — with governments, development banks, startups, and communities — to close the climate risk protection gap and make resilience investable. By leveraging our data, capital, and convening power, insurance can help drive a just, sustainable transition. We’re not just insuring against climate risk. We have the potential to transform the world’s approach to climate resilience.

Singapore Green Bond Framework: A Blueprint for a Sustainable Future First launched in 2022, the Singapore Green Bond Framework marked the nation’s commitment to #sustainablefinance. The 2025 update raises ambitions, targeting S$35 billion in #greenbond issuances by 2030 to fund projects critical for Singapore’s net-zero goal by 2050. What’s New? The updated framework aligns with the latest Singapore-Asia Taxonomy and expands eligible projects, focusing on: 🌞 Renewable Energy: Scaling #solar deployment to 2GWp by 2030 and investing in energy storage systems to manage intermittency. 🚆 Clean Transport: 60,000 #EV charging points, rail expansion connecting 80% of households within a 10-minute walk, and cycling path networks. 🌳 Nature-Based Solutions: Initiatives like the OneMillionTrees movement and #mangroverestoration enhance biodiversity and climate resilience. 🏢 Green Buildings: Higher energy efficiency with BCA #GreenMark-certified projects. ♻️ Circular Economy: Advanced waste-to-energy facilities and resource recovery systems to reduce landfill reliance. Transparency and Governance Overseen by the Green Bond Steering Committee, ensuring rigorous project evaluation and alignment with global standards. Annual reporting tracks fund allocation and impact, with metrics like emissions avoided, energy savings, and biodiversity gains. A carbon tax, rising to S$50–80/tCO2e by 2030, complements the framework, encouraging industries to decarbonize. Regional Leadership Singapore, as ASEAN’s largest green bond market, plays a critical role in bridging the US$1.5 trillion regional investment gap for green initiatives. By aligning local frameworks with global best practices, the nation solidifies its position as a green finance hub while tackling climate challenges head-on. This framework exemplifies how sustainable finance can drive innovation, resilience, and regional collaboration, creating a lasting impact for Singapore and beyond. #sggreenplan #greenbondframework #renewableenergy

Industrial decarbonization is hampered by context-specific risks; guarantees, one of the most effective risk-management instruments, are under-used and fragmented. A dedicated, pooled guarantee facility for industrial decarbonization could be a game-changer. Consider how industrial decarbonization financing differs from solar: for solar, costs fall as cumulative production scales, and those cost reductions largely transfer globally. Industrial decarbonization doesn't work that way. Whether green steel can be produced competitively depends on the local electricity market, dispatch rules, curtailment rates, technology configuration, pricing predictability over a 25-year asset life, and the offtake market. That's why attributes that might strengthen revenue streams for Stegra in Sweden does not affect the economics of green steel in China. One of many reasons that the ‘environmental attribute’ market is deeply problematic: it is neither an accurate representation of whether materials are truly low-carbon nor an effective mechanism to accelerate industrial decarbonization. But because the risks are specific and identifiable, so are the solutions. A project in a region with volatile grid pricing needs an instrument that bounds that volatility over the asset life. A first-of-a-kind plant needs completion guarantees to meet the risk appetite of lenders. Early operating years need instruments to backstop utilization risk. It is increasingly well recognized that guarantees that reallocate those risks can have the greatest leverage for private capital; they are both more affordable and more effective than direct grants or concessional financing. And that ratio improves with pooled guarantees that allow for portfolio-level management. It has been thrilling to think through such pragmatic solutions with Rhian-Mari Thomas OBE and her colleagues at the Green Finance Institute. They bring decades of experience on how to structure financeable transactions. We bring experience on regional and multi-sectoral planning (including how proper planning, clustering, and energy system integration can decisively shift underlying economics). We share a conviction that industrial decarbonization and green industrialization more generally are eminently achievable if properly planned for, with the relevant risks pragmatically identified, allocated, and managed. Laura Garcia Cancino, Rhian-Mari and I make the case for a pooled guaranteed facility for industrial decarbonization in a new short piece out today on illuminem: https://lnkd.in/eD_qWytA We would love to discuss with those working on industrial decarbonization and green industrialization! I am excited to discussing these ideas in at two sessions at the International Vienna Energy and Climate Forum (IVECF) tomorrow, benefitting from the deep expertise and experience of partners and experts from around the world, thoughtfully convened by UNIDO.

Can Green Finance Replace Carbon Pricing? Green finance is becoming mainstream. ESG investing, sustainable finance regulation, climate stress tests, green lending, disclosure rules, and preferential financing are now part of the policy and financial landscape. But Lasse Heje Pedersen’s new Journal of Finance paper asks the hard question: can green finance do the job of a carbon price? The answer is elegant, but uncomfortable. Carbon pricing targets the cost of emissions. Green finance targets the cost of capital. These are not the same instrument. In principle, green finance can mimic a carbon tax. If a firm emits a lot relative to its value, investors can raise its cost of capital. The paper gives a simple translation: the additional cost of capital should equal the “missing” carbon price multiplied by the firm’s emissions-to-value ratio. In other words, if the carbon price is too low, finance can partly fill the gap by making brown firms pay more for capital. But the calibration is the key message. A carbon price of $43 per ton of CO₂—the Nordhaus benchmark used in the paper—would imply only a modest increase in the cost of capital for the average firm, but a much larger increase for highly polluting sectors. For brown electricity firms, it translates into about a 3.2 percentage point increase in the cost of capital. Yet the observed green-finance effect in markets appears closer to an implicit carbon price of only about $4 per ton—an order of magnitude too small. That is the policy lesson. Green finance can help. It can change incentives. It can redirect capital. It can reward cleaner firms and penalize dirtier ones. It can support disclosure, risk pricing, and transition finance. But it cannot be treated as a magic substitute for carbon pricing. For green finance to fully replace a carbon tax, investors would need to internalize emissions at the full social cost of carbon; firms would need to credibly commit to future emissions reductions; and stranded assets would need to be managed without arbitrage by investors willing to buy dirty assets cheaply for high financial returns. These are demanding assumptions. The uncomfortable conclusion is this: without a meaningful carbon price, green finance is pushing against the tide. It can complement carbon pricing. It can strengthen transition incentives. It can help mobilize private capital. But when emissions remain underpriced, financial markets alone are unlikely to deliver the social optimum. The best policy mix is not “carbon pricing or green finance.” It is carbon pricing and green finance: a credible price on emissions, supported by disclosure, supervision, transition finance, and targeted green subsidies where markets fail. Finance can accelerate the transition. But only policy can set the price of pollution. Link: https://lnkd.in/eqJuVUTS #ClimateFinance #GreenFinance #CarbonPricing #ESG #SustainableFinance #FinancialMarkets #ClimatePolicy

In Belém, the COP29 Azerbaijan and COP30 Brazil Presidencies presented a blueprint to mobilize at least US$1.3 trillion a year in climate finance for developing countries by 2035. The collective target is within reach, but will require significant effort from traditional sources, as well as the development of new and innovative financial mechanisms. The Roadmap lays out five priority areas — or 5Rs — with a vision to 2035, each supported by focused action points: 1. Replenishing grants, concessional finance and low-cost capital 2. Rebalancing fiscal space and debt sustainability 3. Rechanneling transformative private finance and affordable cost of capital 4. Revamping capacity and coordination for scaled climate portfolios 5. Reshaping systems and structures for equitable capital flows The Roadmap reflects growing global momentum behind reforming the international financial architecture, especially in the wake of the COVID-19 pandemic. It draws on wide-ranging ideas and engagement from political, financial, economic, and social leaders worldwide. As we approach the end of the decade, the window to safeguard a sustainable planet for future generations is closing increasingly fast. Obstacles are plentiful, ranging from turbulent geopolitics to scarce financial resources and difficult budgetary trade-offs. Nevertheless, we still have an opportunity. The resources exist. The science is clear. The moral imperative is undeniable. What remains is the resolve — to make this the decade where ambition becomes action and humanity’s response finally meets the scale of its responsibility. Read the Roadmap here: https://lnkd.in/d_D-f8nF

🚨 The climate is changing -- so must our financial strategies! A recent report out of Green Finance Institute reminds us that "adaptation financing" is not just a bolt-on fix to climate impacts – it's about transforming our approach to ensure our communities and economies are resilient. 💼 Here's the current state of play in the UK: 👉 The UK requires an investment of £5-10bn yearly to adapt to climate change impacts. 👉 Public and private sectors must team up for this massive financial undertaking. 👉 Adaptation finance exists already! For example, 🌧️ Flood defenses, 🏗️ resilient infrastructure, and 🌾 sustainable agriculture are sectors where green gilts are being used. 💡 The broader opportunities: 👉 Adaptation finance can yield competitive returns, with "adaptation sectors" delivering 16.3% higher cumulative returns over five years compared to the market. 👉Financial services must embrace a dual lens: place-based resilience solutions (e.g. 🌊 physical flood barriers and natural flood management systems) and also the resilience of individual assets (to🌡 heatwaves, flood and drought for example) 🏦💸 The private sector can unilaterally accelerate climate adaptation financing where it comes to non-utility infrastructure, existing housing, and agriculture systems, making low-regret investments that deliver benefits today. But financial institutions still need authoritative direction from Government on future conditions and performance expectations for infrastructure amidst floods, heat, and drought. 🔐 To unlock adaptation finance, we need a combination of policy guidance and improved risk/return incentives. It's also time adaptation took a leaf from the mitigation playbook when it comes to dealmaking. #ClimateChange #Resilience #SustainableInvesting #FinancialInnovation #GreenFinance #ClimateRisk #ClimateAdaptation