GREEN FINANCE AND ESG INVESTMENTS: MOBILISING CAPITAL FOR SUSTAINABLE DEVELOPMENT

Abstract

Green finance and Environmental, Social and Governance (ESG) encompass various financial products seeking to mobilise private capital flows to address climate change and support sustainable development. Faced with a USD 4.2 trillion annual sustainable finance gap, there will not be enough public resources to achieve the 2030 Agenda objectives. Present chapter gives brief definitions of green finance and ESG investing. It discusses how green finance and ESG investing have evolved over time, from trial phases to being ingrained in how companies and investors make decisions. It also questions whether green finance and ESG have done their job of shifting private investments towards projects with positive environmental and social impacts. Studies from 2020 to 2026 about the rise in green bonds, sustainability-associated loans, ESG funds, and impact investing were used. Answering, has green finance been greenwashed? Does ESG run the risk of becoming a box-ticking exercise? By examining the efforts of regulators, central banks, and multilateral development banks in green finance. It ends with some lessons learnt for practitioners on how to ensure that this effort can live up to green finance and ESG's promise. Standardised disclosures, credible taxonomies, buy-in from decision-makers, and well-designed policies will be critical to ensuring that finance reaches the people and planet who need it most.