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2019 | OriginalPaper | Chapter

10. Stimulating Non-bank Financial Institutions’ Participation in Green Investments

Authors : Gianfranco Gianfrate, Gianni Lorenzato

Published in: Handbook of Green Finance

Publisher: Springer Singapore

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Abstract

This chapter analyzes the approaches adopted by institutional investors to manage climate risk in their portfolios and proposes policies to increase climate awareness in this large segment of the capital markets. Because of their size and their role as a conduit of savers’ climate concerns to the capital markets, most non-bank financial institutions are ideally positioned to steer corporate capital allocation towards more sustainable uses. Over the past decades, an increasing number of institutional investors have adopted strategies to mitigate climate exposure. These include negative screening, positive screening, active ownership, sustainability ratings, and hedging of climate risks. These strategies reflect specific fund manager mandates and the recognition that climate risks can have a tangible impact on financial assets’ valuations and, as a result, institutional fund performance. We review the evidence from the adoption of these strategies, in both advanced and developing capital markets. We then analyze the pros and cons of each strategy in promoting more sustainable climate practices and identify best practices. We conclude with policy recommendations for capital markets regulators to incentivize the adoption of sustainable practices among institutional investors.

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Metadata
Title
Stimulating Non-bank Financial Institutions’ Participation in Green Investments
Authors
Gianfranco Gianfrate
Gianni Lorenzato
Copyright Year
2019
Publisher
Springer Singapore
DOI
https://doi.org/10.1007/978-981-13-0227-5_23

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