Introduction
One buzzword that has permeated every industry in the last half a decade is clean energy, green bonds, green economy, sustainable finance and ESG. The growing lexicon reflects a collective recognition of the dangers posed by climate change resulting from the emission of greenhouse gases and environmental degradation, which jeopardizes our economy. As a result, governments, investors, businesses, and individuals worldwide are taking the responsibility to address the issue of climate through the development of decarbonization techniques. In 2015, Nigeria signed the Paris Agreement, pledging to reduce its greenhouse gas emissions by 20% by 2030, and in 2017, the nation increased its reduction pledge to 45%.
To achieve the climate targets set in the Paris Agreement, the Federal Government of Nigeria issued the first green bond in Nigeria in December 2017, making Nigeria the first African country and fourth worldwide to issue a green bond. In this article, we delve into the intertwined realms of sustainable finance, green finance, and green bonds, which are pivotal in financing the transition to a low carbon economy and reducing the effect of climate change while entrenching ESG policies on the other hand.
Sustainable Finance and the Green Economy
Finance is an essential aspect of achieving change. Transitioning to a low-carbon or green economy requires substantial investment capital, innovation and research, market initiatives, risk management and policy support. In sustainable finance, financiers make decisions considering ESG factors, promoting long-term investments in sustainable economic activities and projects.
A key financing innovation is green finance, which involves gathering funds or investments specifically to address climate and environmental challenges. Besides addressing these issues, green finance aims to enhance financial risk management related to climate and environmental risks. This includes strategies such as investing in climate-resilient infrastructure or incorporating environmental considerations into financial risk assessments. The transition towards a green economy offers numerous benefits, including in the areas of economic, social, and environmental. The transition towards a green economy offers numerous benefits, including sustainable management of natural assets, enhanced resilience against climate change, improved energy security, and increased productivity across sectors like commodities and agriculture.
