101 Sustainable Finance Policies for 1.5°C

This executive summary from the Climate Bonds Initiative outlines a comprehensive framework of 101 sustainable finance policies designed to align global capital flows with the 1.5°C warming limit. It argues that while the costs of climate action are high, the costs of inaction are higher, citing increased capital costs for vulnerable nations and credit downgrades for fossil-fuel-dependent sovereigns. The proposed framework is built on three pillars: providing clarity on green investments via taxonomies, tilting investment toward green opportunities through de-risking and carbon pricing, and building green investment pipelines for resilient development.

• Rapid transition to net zero is projected to be economically beneficial, offering trillions in savings and promoting energy sovereignty, job creation, and economic diversification, even without considering avoided climate damage costs.
• Climate inaction and delayed policy changes create significant financial risks, including higher costs of capital for vulnerable countries and credit rating downgrades for fossil-fuel exporters. Specifically, the V20 group faced USD 62bn in higher external interest payments over 10 years, and the 20 sovereigns with the highest fossil fuel export-to-GDP ratios saw a median net downgrade of 1.6 notches between 2015 and 2020.
• To meet the 1.5°C goal, new fossil fuel investments must stop immediately and existing plants should undergo early retirement. To facilitate this, the document suggests using blended finance where Development Finance Institutions (DFIs) and governments absorb high-risk 'junior capital' to attract private 'senior capital'.
• The first pillar of the sustainable finance framework is the implementation of Green Taxonomies to provide guidance on green and transition investments. Aligning national taxonomies with international standards is recommended to attract international private finance and reduce the capacity needed for development.
• The second pillar focuses on tilting investment toward green opportunities through various mechanisms: government and DFI guarantees to de-risk bonds, mandatory transition plan disclosures (as seen in the UK), targeted subsidies (such as US subsidies for low-carbon hydrogen), and the removal of perverse fossil fuel subsidies.
• Central banks can address climate risk to maintain financial stability by adjusting risk weightings for capital and reserve requirements. An example is provided by Hungary's central bank, which established preferential capital requirements for green mortgages due to lower default risks.
• Effective carbon pricing requires high, stable prices and the removal of free allowances. The document advocates for Carbon Border Adjustment Mechanisms (CBAMs) to prevent the relocation of high-carbon activities to countries without pricing schemes, while noting that non-price instruments may be more effective in emerging markets to avoid regressive consumer impacts.
• Energy transition mechanisms are proposed to fund the early retirement of fossil fuel assets. The Asian Development Bank (ADB) has piloted such a mechanism using blended financing to retire or repurpose coal plants in Indonesia, the Philippines, and Viet Nam.

APA

Burge, L. (2022). 101 Sustainable Finance Policies for 1.5°C. Climate Bonds Initiative. https://www.climatebonds.net/files/documents/publications/101-sustainable-finance-policies-for-1.5%C2%B0C_2025-02-17-162921_hlzz.pdf

Chicago

Burge, Lily. 101 Sustainable Finance Policies for 1.5°C. Climate Bonds Initiative, 2022. https://www.climatebonds.net/files/documents/publications/101-sustainable-finance-policies-for-1.5%C2%B0C_2025-02-17-162921_hlzz.pdf.

Wikipedia

{{cite report |last1=Burge |first1=Lily |title=101 Sustainable Finance Policies for 1.5°C |publisher=Climate Bonds Initiative |date=October 2022 |url=https://www.climatebonds.net/files/documents/publications/101-sustainable-finance-policies-for-1.5%C2%B0C_2025-02-17-162921_hlzz.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{burge2022101, author = {Burge, Lily}, title = {{101 Sustainable Finance Policies for 1.5°C}}, institution = {Climate Bonds Initiative}, year = {2022}, month = oct, url = {https://www.climatebonds.net/files/documents/publications/101-sustainable-finance-policies-for-1.5%C2%B0C_2025-02-17-162921_hlzz.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }