Shifting private finance towards climate-friendly investments

The report identifies barriers preventing institutional investors from allocating capital to climate-friendly assets and proposes a two-tiered action plan for EU policymakers. Short-term actions focus on increasing the volume and discoverability of assets through green bonds, credit enhancements, and securitisation. Medium-to-long-term actions aim to shift the decision-making frameworks of investors by lengthening investment horizons, improving stewardship, and mainstreaming carbon risk accounting.

• Institutional investors' current allocation to climate-friendly assets is very low, estimated at approximately 1-2% of their portfolios for pension funds and insurance companies.
• There is a significant gap between current investment levels and the annual climate investment needs, which are estimated at EUR 200bn in the EU and EUR 780bn globally.
• Institutional investors are generally willing to invest in climate-friendly assets provided they meet financial risk-return criteria and are competitive with non-climate alternatives.
• External barriers to investment include a lack of market volume, perceived higher risks (technological, production, and policy), and high transaction costs due to the small scale of many projects.
• Internal barriers within investor decision-making frameworks include short-term performance review cycles (often 3 years or shorter), a lack of climate-integrated fiduciary duty, and insufficient risk-performance methodologies.
• Green bonds are a key channel for fixed-income exposure, but the market remains small, representing roughly 0.05% of the total global bond market as of November 2014.
• Securitisation is proposed as a solution to the 'small scale' barrier by bundling fragmented low-carbon loans into tradable securities, though it is currently hindered by a lack of standardised loan contracts.
• The report recommends that the European Fund for Strategic Investments (EFSI) and the Project Bond Initiative (PBI) prioritise low-carbon investments to avoid locking in high-emissions infrastructure.
• Policy risk—specifically the risk of retroactive changes to support mechanisms like feed-in tariffs—is a major concern for investors, leading to the proposal for an EU-wide policy risk insurance scheme.
• The use of cap-weighted equity indices is identified as a driver of short-termism and a source of bias toward high-carbon assets in institutional portfolios.

APA

Kidney, S., Sonerud, B., Dupré, S., Thomä, J., Cochran, I., Moslener, U., Grüning, C., Bolscher, H., Eichler, L., Perroy, L., Lehmann, A., Barata, P. M., Hulse, J., Oliver, P., & Olsen-Rong, T. (2015). Shifting private finance towards climate-friendly investments. Climate Bonds Initiative. https://www.climatebonds.net/files/documents/publications/climate-friendly_investments_en.pdf

Chicago

Kidney, Sean, Beate Sonerud, Stanislas Dupré, Jakob Thomä, Ian Cochran, Ulf Moslener, Christine Grüning, et al. Shifting private finance towards climate-friendly investments. Climate Bonds Initiative, 2015. https://www.climatebonds.net/files/documents/publications/climate-friendly_investments_en.pdf.

Wikipedia

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BibTeX

@techreport{kidney2015shifting, author = {Kidney, Sean and Sonerud, Beate and Dupré, Stanislas and Thomä, Jakob and Cochran, Ian and Moslener, Ulf and Grüning, Christine and Bolscher, Hans and Eichler, Lisa and Perroy, Louis and Lehmann, Anna and Barata, Pedro Martins and Hulse, James and Oliver, Padraig and Olsen-Rong, Tess}, title = {{Shifting private finance towards climate-friendly investments}}, institution = {Climate Bonds Initiative}, year = {2015}, month = mar, url = {https://www.climatebonds.net/files/documents/publications/climate-friendly_investments_en.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }