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Navigating Low-Carbon Finance Management at Banks and Non-Banking Financial Institutions

Finance

Navigating Low-Carbon Finance Management at Banks and Non-Banking Financial Institutions

Lack of long-term financing, the existence of various risks, the low rate of return, and lack of capacity in market actors are major challenges for the development of low-carbon projects. This paper attempts to provide guidelines for governments and financial institutions by highlighting practical solutions as enabling conditions of low-carbon finance and investment. Such solutions include increasing the role of public financial institutions, increasing the share of non-banking financial institutions in long-term investments, using the spillover tax to increase the rate of return, developing green credit guarantee schemes to reduce the credit risk, and addressing low-carbon investment risks via financial and policy de-risking. These solutions are analysed in detail and considerations for their implementation are discussed throughout the paper. Tools and instruments for low-carbon investments and a practical example of the implementation of the proposed tools are also provided in this paper

ERIA Discussion Paper no 289 

Date

27 August 2019

Category

Finance and Macroeconomy

Editor

Naoyuki Yoshino, Farhad Taghizadeh-Hesary

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