SUSTAINABLE FINANCE POLICIES FOR 1. 5°C

The document outlines a comprehensive framework of 101 sustainable finance policies categorized by three primary ambitions: speed, steer, and simplify. It provides specific recommendations across various government departments—including fiscal, trade, energy, and industrial policy—as well as for central banks and financial regulators. The guide emphasizes the need for science-based targets, the removal of fossil fuel subsidies, the use of green taxonomies, and the implementation of derisking mechanisms like blended finance to mobilize private capital for the 1.5°C transition.

• The global economy could lose USD178tn over the next 50 years if climate change remains unmitigated. Physical climate risk has already increased the cost of capital for the Vulnerable 20 (V20) nations, resulting in USD62bn of higher external interest payments over a 10-year period.
• To meet the 1.5°C goal, climate finance needs are estimated to increase sixfold to over USD4tn by 2030. While the global bond market is approximately USD130tn, market failures in risk-opportunity assessments currently cause investment flows to be dominated by fossil fuels and carbon-intensive sectors.
• Governments can steer the economy by phasing out fossil fuel subsidies, which rose above USD1tn in 2022. Implementing carbon pricing, such as a carbon tax or emissions trading scheme (ETS), can improve the business case for green technologies; for instance, a EUR10/tCO2 price could reduce a country's emissions by 7%.
• To mobilize private finance for higher-risk projects, particularly in emerging markets, policymakers should use blended finance and guarantees. Blended finance leverages concessional funding to absorb junior capital risks, while sovereign-to-sovereign guarantees from developed markets can decrease the cost of capital for emerging market sovereigns.
• Central banks can address climate risk as a threat to financial stability by adjusting monetary and prudential tools. This includes tilting asset purchases toward green performers, adjusting collateral haircuts to reflect climate risk, and implementing green capital and reserve requirements.
• Regulators can simplify sustainable investment by establishing science-based green taxonomies and mandatory climate disclosure requirements. These tools provide clarity on what constitutes a sustainable investment and help prevent greenwashing, while transition plan requirements ensure corporate pathways align with 1.5°C.
• Nature-based solutions (NBS) could provide up to one-third of the emissions reductions needed for the 1.5°C limit. Policies such as Payments for Ecosystem Services (PES) and the use of biodiversity metrics in sustainability-linked bonds can incentivize the protection of carbon sinks.
• The transition requires the early decommissioning of fossil fuel plants. Advanced economies are expected to phase out unabated coal generation by 2030, and the rest of the world by 2040. Energy transition mechanisms can be used to buy and retire these assets while supporting a just transition for workers.

APA

Burge, L., MacKenzie, E., Passaro, F., & Gargallo, J. M. V. (2023). SUSTAINABLE FINANCE POLICIES FOR 1. 5°C. Climate Bonds Initiative. https://www.climatebonds.net/files/documents/publications/Climate-Bonds_101-Sustainable-Finance-Policies-for-1.5C_Mar-2023.pdf

Chicago

Burge, Lily, Eilidh MacKenzie, Fabio Passaro, and Juan Manuel Viver Gargallo. SUSTAINABLE FINANCE POLICIES FOR 1. 5°C. Climate Bonds Initiative, 2023. https://www.climatebonds.net/files/documents/publications/Climate-Bonds_101-Sustainable-Finance-Policies-for-1.5C_Mar-2023.pdf.

Wikipedia

{{cite report |last1=Burge |first1=Lily |last2=MacKenzie |first2=Eilidh |last3=Passaro |first3=Fabio |last4=Gargallo |first4=Juan Manuel Viver |title=SUSTAINABLE FINANCE POLICIES FOR 1. 5°C |publisher=Climate Bonds Initiative |date=March 2023 |url=https://www.climatebonds.net/files/documents/publications/Climate-Bonds_101-Sustainable-Finance-Policies-for-1.5C_Mar-2023.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{burge2023sustainable, author = {Burge, Lily and MacKenzie, Eilidh and Passaro, Fabio and Gargallo, Juan Manuel Viver}, title = {{SUSTAINABLE FINANCE POLICIES FOR 1. 5°C}}, institution = {Climate Bonds Initiative}, year = {2023}, month = mar, url = {https://www.climatebonds.net/files/documents/publications/Climate-Bonds_101-Sustainable-Finance-Policies-for-1.5C_Mar-2023.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }