FEATURE: Guide to the world of finance – for climate change professionals
Kirsty Hamilton of Chatham House introduces a new guide that provides a factual overview of the landscape of finance – sources of capital, what the capital markets do, how transactions work – for climate change professionals who need to understand the finance world better in order to implement the Paris climate agreement.
The Paris UN Climate Agreement in December 2015 refocused attention on the need to mobilise substantial private capital flows into climate solutions at the pace and scale required to combat climate change with the required urgency.
Implementation of national clean energy or ‘green’ infrastructure plans will require unprecedented levels of private investment, not only for climate reasons, through Nationally Determined Contributions (NDCs), but also to deliver energy security and access to energy for those who lack them, as well as creating the conditions for sustainable development.
Now, more than ever, it is critically important for policy-makers and non-financiers to understand and interface with the financial community to establish effective conditions at national level, where the investment case will have to be made.
As a practical contribution, the Finance Guide provides a factual overview of the landscape of finance – sources of capital, what the capital markets do, how transactions work – and more broadly to set common finance terms in context.
The guide reflects recent changes in market conditions, financing structures and relevant policy debates. Topics covered include:
- How finance generally works;
- What the different parts of the finance sector do;
- What issues financiers consider when investing, including the role of policy and regulation;
- Capital markets and where, for example, ‘green bonds’ fit in;
- The variables affecting finance decisions;
- Energy efficiency – an expanded section, and an update on issues relating to emerging or developing-country markets;
- A practical focus on ‘climate finance’, including finance-sector-led initiatives that are accelerating actions at both the low- and high-carbon end of the spectrum.
The guide was endorsed by Christiana Figueres, former Executive Secretary of the UN Framework Convention on Climate Change: “As the world focuses on implementing the Paris Agreement, attracting scaled-up investment to climate solutions will be critical.
“For those of us who do not come from the finance world but need to understand it better – this Guide provides an excellent foundation to the key aspects of who does what and why in finance. It has become a favourite reference for me.”
The guide is published by Bloomberg New Energy Finance in collaboration with Chatham House and the UNEP Collaborating Centre for Climate & Sustainable Energy Finance at the Frankfurt School. First published in 2009, this 2016 update was written and produced by Kirsty Hamilton who has been working with clean energy finance practitioners on the policy conditions for investment for over 12 years through Chatham House.
Image: NYSE, courtesy Rosie Tulips.