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Greening investments in the face of climate risk

To what degree can the emerging green bond market catalyse investment for low-carbon and climate-resilient solutions?

This is a joint research project from the Stockholm Environment Institute (SEI) and CICERO that aims to understand the perceptions and motivations of investors and issuers in the green bond market, forming a basis for improving information systems to help investors mitigate carbon and climate risk. The project is funded by the Wallenberg Foundation.

  • In the first part, the objective is to explore motivations for issuers and investors to engage in the green bonds market.
  • In the second part, the objective is to explore knowledge level and handling of climate change related risks among investors in green financial products, foremost green bonds.
  • Next, based on our findings, we will propose improvements to the climate change information for financial markets, in terms of both accessibility and usefulness of the information.

Investors face a confusing landscape of information about climate risks and green financial products, and may be driven by different motivating factors. The information they receive on changing climate policy and physical impacts is not only complex, but with vastly different spatial and time scales than investors typically deal with. While investors are increasingly aware of climate risk in a vague sense, there is a lack of clear and tailored information about climate risks and green financial products to feed into financial decision-making.

The scope of the project covers the main types of institutional investors (pension funds, sovereign wealth funds, insurance companies, asset managers, investment companies, and banks), and their use of green financial instruments, particularly green bonds, and their approach to climate risk (both the physical impacts of a changing climate and the changing landscape of climate policy). The project also covers private and public issuers of green bonds, such as renewable energy companies, real estate companies, banking and finance, and municipalities and cities.