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Rethinking Climate Finance

September 2019
Impact investment manager BlueOrchard (“BlueOrchard”), in collaboration with the FINEXUS Center for Financial Networks and Sustainability of the University of Zurich, has analysed opportunities and challenges that climate change poses for financial players. A strong partnership between private investors and the public sector was identified as a pivotal element to maximise synergies and mobilise capital required to achieve the targets outlined in the Paris Agreement and the Sustainable Development Goals (SDGs).
In “Rethinking Climate Finance”, BlueOrchard and Prof. Stefano Battiston, director of the FINEXUS Center for Financial Networks and Sustainability of the University of Zurich, discuss climate-related risks and their impact, especially on less-developed countries as well as potential economic losses in the financial system.
Building on their experience and knowledge in the asset-management industry, the paper highlights the urgent need but also great opportunity for private financial players to develop portfolios that are more resilient to climate-related risks. The paper provides insights in the form of a case study and a private investor survey, discussing how climate finance and investment vehicles must be developed further to meet private investors’ needs and expectations in order to enable them to take advantage of the climate finance market’s opportunities and to increase their engagement in climate finance. 
Furthermore, the paper identifies important steps that need to be taken in order for the private sector to realise the significant role it has in upscaling the funding needed to reach the targets of the Paris Agreement and the SDGs and help tackle the consequences of climate change. Rethinking financial risk by taking a science-based and forward-looking approach to risk has been identified as key for resilience. Finally, the strengthening of the partnership between private investors and the public sector has been highlighted as a crucial aspect in this context. 
The paper is enriched by a number of testimonials of renowned public and private sector representatives, such as the European Investment Bank, the German development bank KfW, and Nordea, the largest financial services group in the Nordic region. 
BlueOrchard and the Department of Banking and Finance of the University of Zurich are working towards a cooperation to develop scientific metrics and bridging the gap between research and practice. This paper on climate finance presents a first step in that direction.
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