Here’s How ‘Green Finance’ Aims to Save the Planet

The field known as green finance could be at a tipping point. After a decade of explosive growth, it’s running into a perhaps surprising roadblock: a shortage of projects that are green enough. That’s set off a scramble to create a wider range of debt-market instruments and incentives. Central bank officials and a growing list of investors are pushing to make the $100 trillion bond market -- one of the world’s largest pools of money -- a driving force in the urgent efforts to limit climate change.

Massive amounts of money are shifting toward environmentally conscious investing. How much depends on how the field is defined: By the broadest measure, $31 trillion has been invested in assets that have been screened to weed out companies scoring poorly on an environmental, social or governance (ESG) concern. The simplest and most established form is green bonds, which fund environmentally friendly projects. The amount of green bonds sold in the first half of 2019 was up 44% from the same period in 2018; new borrowers included the governments of Chile and Ireland, PepsiCo Inc. and Verizon Communications Inc. But the $750 billion or so issued so far represents just a tiny slice of the overall bond market.