Climate Policy and Green Finance

Climate policy and Green finance Rintaro Tamaki 2017.11.13 (GIC TOKYO) 1

To address the risk of climate change… Financial crisis vs Climate risk Zero net greenhouse gas emissions in the second half of the century

Decarbonization But still we are awash in fossil fuels (coal, oil and gas). It requires economic and social transformation Risks and opportunities

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Aligning growth, climate, investment and financing policies

 A clear and robust price signal on GHG emissions (carbon pricing, fossil-fuel subsidies)  Aligning all existing policies (trade, taxation, energy, competition, land use, …) for low-emission, resilient investment  Forward-looking support to low-carbon technologies (innovation)  Public infrastructure choices and procurement  Mobilizing capital to support green infrastructure 3

Summary map of existing, emerging and potential carbon pricing initiatives

Source: World Bank, Ecofys and Vivid Economics, 2016, State and Trends of Carbon Pricing 2016

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Carbon pricing initiatives: share of global GHG emissions covered

Source: World Bank, Ecofys and Vivid Economics, 2016, State and Trends of Carbon Pricing 2016

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Prices in existing carbon pricing initiatives

Source: World Bank, Ecofys and Vivid Economics, 2016, State and Trends of Carbon Pricing 2016

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An ambitious 2°C scenario requires only a 10% increase in infrastructure investment ‌

USD 3.4 -4.4 trillion: Current total infrastructur e spending

…and finance it (green finance) Stranded assets(coal, oil and gas reserves) Coal-fired power stations?

“Stranded assets and Thermal Coal in Japan” (Smith School of Enterprise and the Environment, Oxford) http://www.smithschool.ox.ac.uk/research-programmes/stranded-assets/s atc-japan.pdf

Divestment (from fossil fuels) 544 institutions (insurance companies, pension funds, endowments…) with $3.4 trillion assets under their management has committed divestment.

Norvegian Government Pension Fund Exclusion (Divestment) from production of coal or coal-based energy 8

ď‚–Disclosure of climate-related information TCFD(Task Force on Climate-related Financial Disclosures, chaired by M. Bloomberg)

ď‚–The role of institutional investors (fiduciary duty) and capital markets (green bonds)

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Development of the green bond market Annual issuance of green bonds (USD billion, gross issuance)

Note: SSA includes supranational, sub-sovereign and agency issues other than US municipal bonds.

Source: SEB analysis provided to OECD, based on Bloomberg data