Professor Volz invited by Asian Development Bank to Present on Green Investment Banks
Professor Ulrich Volz, the Director of the SOAS Centre for Sustainable Finance, was invited by the Asian Development Bank to address senior policymakers from across Developing Asia at a 2-day event on Greening Financial Systems and the Role of Multilateral Development Banks.
Professor Volz delivered a presentation on ‘Green Investment Banks: Unleashing the Potential of National Development Banks to Finance a Green and Just Transition’. In his address, he highlighted the limitations of commercial financial institutions in providing long-term finance, especially for activities with uncertain returns and positive externalities, and called for a greater role of public financial institutions in scaling up investment in climate action and achieving the Sustainable Development Goals.
Professor Volz argued that green investment banks can assume a key role in helping to finance the Agenda 2030 and climate action. A green investment bank is a publicly capitalised, non-profit financial institution with a public purpose mandate to enable a green and just transition. They can leverage public funds and scale up investment in adaptation and mitigation projects that create positive externalities at lower cost than commercial entities could. They can also showcase the viability of innovative green investments and help to transform the financial sector by mainstreaming sustainability principles and establishing best practice.
Professor Volz made the case for either establishing new green investment banks from scratch or, where appropriate, transforming existing public development banks into green investment banks by updating their mandate and building necessary expertise in green finance. In either case, it is vital that these institutions are well governed so that they can fulfil their public purpose.
Multilateral development banks can help this in two ways. First, through technical assistance they can help green investment banks to build strong governance frameworks and build expertise in sustainable finance. Second, multilateral development banks can help green investment banks to develop a good standing in capital markets. This could be done, for instance, by providing callable capital or by providing guarantees that will help green investment banks to issue bonds at low cost so that they can refinance themselves at relatively low cost and provide concessionary finance for green investment.
