FOSTERING GREEN ECONOMY THROUGH NEW FINANCIAL INSTRUMENTS IN CENTRAL BANKS’ PORTFOLIOS

Abstract

The green economy implies the use of renewable energy from biomass, solar
panels, wind power plants and recycled waste, while providing the environmental
protection, human well-being and sustainable economic progress. As with other
investments, the important question is how to find sufficient sources of funds and
get investors interested in these projects. Global green bond issuance started along
with the increasing need for financing green businesses and technologies, resolving
climate change issues and financing through efficient emission of green securities
and trading on markets. The proceeds of these bonds are explicitly used to finance
new or existing green projects. This paper examines the concept and evolving of
green bonds with emphasis on the new role of central banks in greening financial
systems and its impact towards a green economy. The green bond market dates
back to 2007, with launching the World Bank Green Bonds programme in 2007
and the Climate Awareness Bonds by the European Investment Bank (EIB) in 2008
for financing renewable energy and energy efficiency projects. The significance of
making bond between sustainable economic development and environmental issues
is evident through the rapid growth of these green instruments. The objective of
this research was to identify new types of financial instruments intended to
improve ecological projects, as well as to compare effects of green bonds
utilization in different countries and by different institutions. The results show the
improvement of the financial market and investor profits, while there is
simultaneously significant growth of green projects pointing to the benefits of
using this new form of financial instrument in promoting the green economy.