Environmental Finance

Abstract

This chapter examined the rising prominence of what is commonly referred to as "Environmental Finance." While the notion of ethical investing that is seeking to avoid investments in industries perceived as providing socially negative outcomes such as tobacco companies. gambling and gaming companies etc., has long been a feature of the investment landscape. Environmental Finance has emerged as another investment class with a much greater concentration of projects with very defined environmental objectives. A number of financial instruments have emerged to serve this growing marker including Green Bonds, Green Bond Funds, REDD/REDD+, and Debt-for-Nature Swaps (DNS). While some instruments, such as Green Bonds, are used to finance environmentally centered projects, their popularity and acceptance in the capital markets have also risen due to investor demand for such investments and are available to wholesale and retail investors via Green Bond Funds. Green Bonds are defined in many ways and provide considerable flexibility in terms of the scope of projects able to be funded under this banner to those raising funds. However. Environmental Finance can also encompass more specific objectives such as REDD/REDD+ projects where the objective is a more targeted funding model to counter "reducing emissions from deforestation and forest degradation. In a completely different approach, other innovations have emerged to tackle the financing of environmentallv centered projects. One of these is the DNS where debt obligations are purchased at a discount by various bodies such as the World Wildlife fund and the proceeds used to finance the conservation and management of large tracts of typically native forests.