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According to the IMF, the global financial sector can play a very important role in the transition to a green economy.
The International Monetary Fund (IMF) has published the third part of its annual Global Financial Stability Report titled “Investment Funds: Supporting the Transition to a Green Economy”.[1]
According to the data of the study, the size of investment funds directly focused on climate change increased from 57 billion dollars in the last quarter of 2019 to 133 billion dollars in the same period of 2020.
In addition, the size of sustainability funds excluding environment reached 2.91 trillion dollars, and the size of environmental funds excluding climate reached 583 billion dollars.
According to IMF data, the size of all investment funds, around 36,500 in total, reached 48.93 trillion dollars as of the end of 2020.
The study also referred to the IPCC's latest report and underlined the need to make significant investments in a low greenhouse gas emission (green) economy in order to achieve net zero emission targets in the next 30 years.
According to the report, this goal requires an investment of 20 trillion US dollars, equivalent to 0.6 to 1% of the global Gross Product.
The study emphasized that the global financial sector could play an important role in this investment need, but stated that there were many direct and indirect shortcomings.
These shortcomings are mainly listed as lack of sufficient data, lack of clarity in classifications, and appropriate regulatory oversight and verification mechanisms to avoid corporate greenwashing.
According to the study, after a climate information architecture can only be established by eliminating these deficiencies, policy makers can take savings that will provide fund transfer, such as carbon taxes, as a complement to climate change adaptation policies.
However, among the recommendations in the study to increase climate finance were that asset managers should clearly emphasize the distinction between the broad concept of sustainability, which covers environmental, social and governance issues, and climate issues, in order to attract investors with environmental and climate goals, and also increase fund offerings with well-defined precise targets.
[1] Chapter 3: Investment Funds: Fostering the Transition to a Green Economy
Source: yesilekonomi.com
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