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Source: The post is based on the article “Climate finance must get beyond greenwishing and greenwashing” published in “Live Mint” on 22nd September 2023.
Syllabus: GS2- Environment- climate change
News: The article discusses the requirement for practical and accessible investment solutions to combat climate change. It highlights the importance of profitable, liquid investments such as ETFs in climate-resilient real estate, green commodities, and inflation-proof assets. The article emphasizes the use of digital, tokenized assets to include unbanked populations, with the aim of achieving genuine impact and avoiding empty, unfulfilled green promises, especially with CoP-28 approaching.
Why is there a need for practical and accessible investment solutions to fight climate change?
Climate Change Affects All: It is impacting both poor and rich countries, creating an urgent need for broad-based resilience and adaptation strategies.
Unlocking Private Sector Resources: Scalable solutions require substantial commitments from the private sector, with many current climate-centric investments being illiquid and tightly wound up in private-equity funds.
Inclusion of Ordinary Investors: Many current climate investments are inaccessible to ordinary investors and savers who are the most exposed to climate-driven food, water, and energy insecurity.
Need for Diversified Solutions: Diversified, liquid, and profitable investment solutions like ETFs in climate-resilient sectors can mobilize capital effectively and are essential for inclusivity, including the unbanked global population.
How can climate investments be made accessible?
Developing Liquid Investments: Create climate investments that are liquid and profitable like ETFs, which are easily accessible to individual and institutional investors.
Encouraging Investment in Climate-Resilient Real Estate: Invest in weather-proof, stable geographies. Using Real Estate Investment Trusts (REITs) and ETFs can help secure reliable returns from these investments.
Investing in Green Commodities: Focus on commodities essential for renewable energy and electric vehicles, like copper and lithium, to avoid greenflation and supply bottlenecks.
Offering Inflation-Proof Assets: Include assets like short-term and inflation-indexed sovereign bonds and gold in portfolios to provide a hedge against inflation and geo-economic risks.
Creating Tokenized Assets: Develop digital, tokenized representations of climate investment solutions to include unbanked populations, ensuring they are backed by real-world assets.
What solutions are offered?
Digital assets must be backed by real-world physical and financial assets to be a viable solution, avoiding speculation risks and preserving liquidity.
