A New Tool in the Fight against Climate Change: Green Bonds

Abstract

There is a reality and danger defined as climate change on the agenda of the world. Climate change poses the greatest threat to humanity. It is obvious that environmental shocks will be more extreme and more frequent. No government or institution can solve this problem alone. Besides, climate risk has now become a financial risk. As such, investors have sought new products across all asset classes that somehow address the challenges of climate change (Jack Morton Auditorium, 2018). Therefore, there was a need for interaction between environmental officials and financial experts, and green bonds, one of the tools of green finance, emerged. Green bonds have been introduced to finance emission reductions, sustainable development, and other cleaner production investments that help achieve the Paris Agreement's 2°C temperature target. Green bonds play an essential role in the fight against climate change because green bonds are used only for environmentally friendly projects. Previous studies have found that investments in environmental protection rarely bring economic benefits to companies. But this view has changed as the economy has improved, and current research shows that green practices can bring profits to companies. For this reason, green bonds are increasingly being applied to finance emission reductions and sustainable development that help achieve the 2° C temperature target of the Paris Agreement.