Investment Barriers to Sustainable Finance: How to Enable the Transition in G20 Economies

Théo Aphecetche

No 83, European Economy - Economic Briefs from Directorate General Economic and Financial Affairs (DG ECFIN), European Commission

Abstract: The transition to a low-carbon economy requires significant investments in green technologies and infrastructure. Despite growing demand for sustainable finance, investment barriers persist, hindering the flow of capital towards environmentally sustainable projects. Building on a literature review, and analysis of existing work in G20 countries, this brief identifies three key investment barriers: legislative, skills-related, and operational. The brief highlights for each barrier possible solutions to lift or at least reduce them and identify possible room for international cooperation. We identify where such solutions are being discussed in the framework of the G20 such as the G20 voluntary high-level Principles for Financial Institution and Corporate Transition to ensure globally consistent and comparable disclosure standards – addressing legislative barriers, or the G20 Technical Assistance Action Plan to create an ecosystem of capacity-building initiatives encompassing a series of advisory, operational, and technical programs – addressing skills-related barriers. The brief underlines that further efforts are still warranted to ensure effective implementation of the G20 recommendations/tools. The brief also goes beyond G20 existing initiatives and offers some additional solutions to further address the identified barriers such as agreeing on clear, science-based and interoperable taxonomies - to address legislative barriers, and develop market-based solutions, such as green bonds and other financial instruments, to incentivise investment in green projects – and address operational barriers.

Keywords: sustainable finance; macroeconomic enabling factors; green transition; investment; green skills. (search for similar items in EconPapers)
JEL-codes: E61 G28 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2025-01
New Economics Papers: this item is included in nep-ene, nep-env and nep-ppm
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