Integrating policy incentives and risk management for effective green finance in emerging markets
1 Independent Researcher, Washington, United States.
2 Obat Oil and Petroleum Limited, Lagos Nigeria.
3 Independent Researcher, Australia.
Review
International Journal of Frontiers in Science and Technology Research, 2024, 07(01), 076–088.
Article DOI: 10.53294/ijfstr.2024.7.1.0050
Publication history:
Received on 03 August 2024; revised on 24 September 2024; accepted on 27 September 2024
Abstract:
Integrating policy incentives and risk management is pivotal for driving the growth of green finance in emerging markets. The transition to sustainable finance necessitates an alignment between government policies and financial institutions to mitigate the risks associated with green investments. This abstract explores how policy incentives, such as tax breaks, subsidies, and regulatory frameworks, can encourage financial institutions to channel investments into green projects while addressing market-specific challenges like underdeveloped financial infrastructure and regulatory gaps. In emerging markets, the perceived risks of green investments, such as uncertain returns and regulatory volatility, often deter private sector engagement. However, integrating robust risk management strategies—including diversification, public-private partnerships, and risk-sharing mechanisms—can significantly reduce these risks, thereby enhancing the attractiveness of green finance. Additionally, government-backed incentives can lower capital costs for green projects, enabling financial institutions to provide more favorable lending terms. Regulatory frameworks that standardize green finance criteria and reporting are also critical for fostering transparency and accountability, which in turn build investor confidence. The interplay between policy incentives and risk management is further highlighted through case studies from emerging markets that demonstrate successful implementation of green finance initiatives. These examples illustrate how policy-driven support mechanisms and comprehensive risk management frameworks can unlock significant investment potential in green infrastructure, renewable energy, and sustainable agriculture. By fostering a supportive policy environment and addressing risk factors through innovative financial instruments, emerging markets can enhance green finance flows, promote sustainable development, and contribute to global climate goals. This integrated approach is essential for bridging the financing gap in green projects, ensuring that environmental sustainability is aligned with economic growth and risk mitigation.
Keywords:
Green finance; Emerging markets; Policy incentives; Risk management; Sustainable investments; Public-private partnerships; Financial instruments; Regulatory frameworks; Climate goals; Green infrastructure
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