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Political Science > Environmental Policy

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Cover IMF Working Papers
A Market for Brown Assets To Make Finance Green
Mr. Domenico Fanizza and Laura Cerami
This paper proposes a market solution to enhance the role of the financial sector in the green transition. Developing a secondary market for “brown exposures” can allow banks to dispose more quickly of stranded assets thereby increasing their capacity to finance green investments. Furthermore, newly created instruments – the brown assets backed securities (B-ABS) - can expand the diversification opportunities for specialized green investors and, thus, attract additional resources for new green investments. The experience of the secondary market for non-performing loans suggests that targeted policy and regulatory measures can simultaneously support the development of the secondary market for brown assets and green finance.
Keywords:
Green finance; financial innovation; greenium; financial sector; climate change; market solution; experience of the secondary market; green transition; policy simulation; Climate finance; Nonperforming loans; Securities markets; Climate policy; Global; Europe
Cover IMF Working Papers
Do Banks Price Environmental Transition Risks? Evidence from a Quasi-Natural Experiment in a Chinese Province
Bihong Huang, Maria Teresa Punzi, and Yu Wu
This paper assesses the financial risks arising from transition toward a low-emission economy. The environmental DSGE model shows tightening environmental regulation impairs firms’ balance sheets, and consequently threatens financial stability in the short term. The empirical analysis indicates that following the implmentation of Clean Air Action Plan, the default rates of high-polluting firms in a Chinese province rose by around 80 percent. Joint equity commercial banks with higher level of independence were able to appropriately price in their exposure to transition risks, while the Big Five commercial banks failed to factor in such risks.
Keywords:
E-DSGE Model; Financial stability; Clean Air Action Plan; transition risk; baseline analysis; default rate; data source; capital market department; Loans; Environmental policy; Commercial banks; Self-employment; Global