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The first ever Global Green Finance Index was launched by Z/Yen and Finance Watch last week, and the financial centers of Western Europe outperformed those in other regions based on the perception of the quality and depth of their green finance offerings. 

Green Economy

Western Europe Financial Centers Win Big In Inaugural Global Green Finance Index

The first ever Global Green Finance Index was launched by Z/Yen and Finance Watch last week, and the financial centers of Western Europe outperformed those in other regions based on the perception of the quality and depth of their green finance offerings. 

The first ever Global Green Finance Index was launched by Z/Yen and Finance Watch last week, and the financial centers of Western Europe outperformed those in other regions based on the perception of the quality and depth of their green finance offerings.

The Global Green Finance Index (GGFI) was created in an effort to “chart the progress of the world’s financial centres towards a financial system that delivers sustainable development, and values people and the planet as much as profit.” Created by NGO Finance Watch and commercial think-tank Z/Yen, the GGFI ranks the world’s leading financial centers based on a worldwide survey of finance professionals’ views “on the quality and depth of green finance offerings across 108 international financial centres.”

“The core of the GGFI is a perception survey which observes and promotes change where it matters most — in people’s minds,” explained Professor Michael Mainelli, Executive Chairman of Z/Yen. “The more we can get people talking about a sustainable transition, the quicker it will happen. The high level of interest in GGFI 1 is a step in that direction.”

“The GGFI aims to contribute to the definition of green finance and identify best practices and areas for improvement,” added Benoît Lallemand, Secretary General of Finance Watch. “We hope it will promote bold policy initiatives and high-quality financing that can cut through greenwash. It is urgent that sustainable finance becomes mainstream in all financial centres.”

According to this inaugural edition of the GGFI — GGFI 1 — the top five centers for Green Finance – Penetration are London, Luxembourg, Copenhagen, Amsterdam, Paris; and for Green Finance – Quality are London, Amsterdam, Brussels, Hamburg, Paris (penetration referring to a financial center’s overall financial activities, and quality referring to the quality as compared to its market volume).

Western Europe led the way with nine of the top ten centers in the quality index and seven of the top ten in the penetration index. San Francisco and Washington were an equal tenth place in the ranking and therefore the top North American centers in the quality index, while San Francisco is also the leading North American center in the penetration index. Shanghai and Shenzhen led in the Asia Pacific Region for quality and penetration respectively, while Johannesburg ranked first in the Middle East and Africa region for quality, followed closely by Cape Town which also topped the penetration index for the region. Mexico City and Moscow were the only financial centers to achieve enough survey responses to qualify across the Latin America and the Caribbean region, and Eastern Europe and Central Asian regions.

Respondents also predicted that Paris, New Delhi, and Los Angeles would see their green finance offerings improve significantly over the next two to three years, while Paris, Frankfurt, and New York were expected to become more significant for the green financing sector. Unfortunately, the same predictions expect to see Moscow, Boston, and Chicago decline in their green finance offerings over the next two to three years.

Looking specifically at green financing areas of interest, respondents to the survey were most focused on green bonds and renewable energy investments, and emerging areas such as sustainable infrastructure financing and energy efficiency also scored well. There is less interest, however, in climate risk stress testing, divestment from fossil fuels, carbon markets and carbon disclosure, natural capital valuation, and green insurance.

What will be most interesting to track over the course of future GGFIs is whether interest in green bonds and renewable energy investments can be sustained and whether the important areas of divestment and carbon markets and carbon disclosure will receive the required attention to drive necessary change in investing and business policy.

 
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