Shaping Financial Markets Dealing with Climate Change

We are witnessing an energy transition where renewable energy is becoming a more competitive technology than traditional fossil fuels. Besides, the climate imperative is pressing policy makers to internalize negative environmental externalities. Scientific evidence demonstrates that the cost of inaction is larger than the cost to face the challenges posed by climate change. In this sense, adapting the economy to a more stressful reality and dealing with huge and promising niches compose the new environment that needs to be assumed by the financial community in their investment decisions. On the other hand, engagement with climate change solutions will aid finance to recover the public legitimacy highly damaged since the Great Recession.

On the eve of Paris agreement this paper explores the first steps required to make a systemic change in financial markets ; to make them fitter to deal with the challenges of climate change. How public sources are expected to move in the short term and how private finance can innovate and scale up means to best deal with these changes.