Green Finance

The main thesis of the policy note of the environmental economists Angela Köppl and Sigrid Stagl is that the achievement of the Paris climate goal of limiting the temperature increase to a maximum of 2°C compared to the pre-industrial level requires a fundamental structural change of the existing energy systems with corresponding effects on the financial sector. On the one hand, numerous studies and estimates are available to estimate the financial needs for the transition to a decarbonised economy. On the other hand, the risks of adhering to existing structures, such as financial risks due to damage caused by environmental events, as well as stranded assets due to regulatory or technological changes are quantified.

Integrating climate knowledge and economics into the financial sector and financial decisions would draw attention on the interactions between climate change, disruptive technologies and new business models and shift financial flows from emission-intensive investments to low-emission investments. A consistent orientation towards functionalities as a result of stock-flow interactions can serve as a compass to identify risks, uncertainties and opportunities for investors.

SUERF Policy Note, Issue No 45, "A plea for a paradigm shift in financial decision-making in the age of climate change and disruptive technologies" (free download)