Project Overview

To achieve a sustainable economy, we need to allocate more capital to certain activities that are critical to a sustainable future – for example, those that are resource-efficient, low-carbon, and inclusive. The problem is that many of these are perceived (through a short-term lens) as high-risk, and are therefore not attractive to the bulk of investors.

So, for example, the models used by many pension funds will identify a fossil fuel investment as lower risk than a renewable energy investment because of the technical, regulatory and management risks that often accompany it. And yet we know that we are storing up significant climate risks which will affect our future quality of life if we do not shift to low-carbon sources of energy in the very near future.

As these ‘new’ asset areas mature, investors will become more comfortable with them and will be prepared to invest more. But how can the early pilots and roll-outs be funded? And how can this necessary investment be scaled up as quickly as possible?

This project, funded by Barclays, is to explore the various models that have been developed, to determine which of these might be scaleable and replicable, and to assess what the road map for Barclays and others might be.

We will produce a report, in collaboration with Barclays, later in the year.

Our work on forest-backed bonds is one example of how we have explored innovative financial instruments for social and environmental outcomes.