A Market for Brown Assets To Make Finance Green

Domenico Fanizza and Laura Cerami

No 2023/011, IMF Working Papers from International Monetary Fund

Abstract: This paper proposes a market solution to enhance the role of the financial sector in the green transition. Developing a secondary market for “brown exposures” can allow banks to dispose more quickly of stranded assets thereby increasing their capacity to finance green investments. Furthermore, newly created instruments – the brown assets backed securities (B-ABS) - can expand the diversification opportunities for specialized green investors and, thus, attract additional resources for new green investments. The experience of the secondary market for non-performing loans suggests that targeted policy and regulatory measures can simultaneously support the development of the secondary market for brown assets and green finance.

Keywords: Green finance; financial innovation; greenium; financial sector; climate change; market solution; experience of the secondary market; green transition; policy simulation; Climate finance; Nonperforming loans; Securities markets; Climate policy; Global; Europe (search for similar items in EconPapers)
Pages: 20
Date: 2023-01-20
New Economics Papers: this item is included in nep-ban, nep-ene and nep-env
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