A Market for Brown Assets To Make Finance Green
IMF Working Papers, January 20, 2023
Source details
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- A Market for Brown Assets To Make Finance Green
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Bibliographic details
- Authors: Domenico Fanizza, Laura Cerami
- Published: January 20, 2023
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400231414.001
Core proposition and mechanism
- Proposes a market solution to enhance the role of the financial sector in the green transition.
- Develop a secondary market for “brown exposures” to enable banks to dispose more quickly of stranded assets and thereby increase their capacity to finance green investments.
- Introduce newly created instruments—brown assets backed securities (B-ABS)—to expand diversification opportunities for specialized green investors and attract additional resources for new green investments.
- Draws on the experience of the secondary market for non-performing loans to argue that targeted policy and regulatory measures can simultaneously support the development of the secondary market for brown assets and green finance.
Key findings and insights
- A secondary market for brown exposures can:
- Allow banks to dispose more quickly of stranded assets.
- Increase banks’ capacity to finance green investments.
- Brown assets backed securities (B-ABS) can:
- Expand diversification opportunities for specialized green investors.
- Attract additional resources for new green investments.
- The experience of the secondary market for non-performing loans suggests that:
- Targeted policy and regulatory measures can support both the development of the secondary market for brown assets and the expansion of green finance.
Thematic coverage and keywords
- Subjects: Climate change, Climate finance, Climate policy, Environment, Financial institutions, Financial markets, Nonperforming loans, Securities markets
- Keywords: climate change, Climate finance, Climate policy, Europe, experience of the secondary market, financial innovation, financial sector, Global, Green finance, green transition, greenium, market solution, Nonperforming loans, policy simulation, Securities markets
Policy implications and recommendations (as presented)
- Design targeted policy and regulatory measures to support the development of a secondary market for brown assets.
- Facilitate creation and marketability of brown assets backed securities (B-ABS) to channel specialized green investors’ funds into new green investments.
- Leverage lessons from the secondary market for non-performing loans when crafting regulations and market structures for brown assets.
IMF Working Paper No. 2023/011 — Domenico Fanizza and Laura Cerami (January 20, 2023).
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- Working Paper