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Boosting demand: Mandates for domestic funds, quantitative easing

Policymakers can also grow the green bonds market by providing support on the demand side. Governments regularly provide guidance to state investment funds, sovereign wealth funds and the like about investment filters that will support a sustainable economy. The same can apply to green investments.

By putting in place such mandates, policy makers signal to bond issuers that there is robust demand for their green bond issuance.

Policy actions

  1. Government funds investment quotas for green: Governments could consider directing pension, social security and other funds to allocate a percentage of their fixed income budgets to green bonds, reflecting the relative priority of green investments in the country’s policies.
  2. Development bank investment quotas for green: Existing development banks need to become green banks that deliver government policy towards a low carbon economy. At a minimum they should not be investing in coal of any sort. That's beginning to happen with recent moves by the EIB and the World Bank.

    Development banks should increasingly move to focusing on playing a role to leverage the private sector rather than provide direct funding through loans or grants.

  3. Green quantitative easing directly into green infrastructure bonds would support urgently needed investment.