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FINANCING THE TRANSITIONTwenty-first century capital markets might be defined by their response to climate change. Politicians have played a crucial role in setting the agenda, raising public awareness and – as we saw in Paris – building international consensus. NGOs too have long championed a dash toward a carbon-neutral economy, and global authorities like the G7 now put environmental concerns at the top of their agenda. But the success or failure of these efforts rests ultimately with investors; with those individuals and institutions willing to back new technologies and infrastructure projects, and with the creation of sufficiently deep, liquid and resilient markets for them to access green products and services.  The transition toward green capital markets is now well underway. It began in 2007 with issuance of the first green bonds, sold not because of political pressure or public subsidy, but due to rising demand for high-quality, low-carbon assets. They have generated record-breaking issuance volumes since, are worth in excess of US$100 billion globally and are coveted for their value as a hedge against carbon-related risks, as well as their reputation for transparency, integrity and high returns. Linking political conviction with the long-term concerns of institutional investors and the desire that exists amongst local communities to improve their immediate environs is inherently prudent, profitable – and one of the best tools available to global policymakers in the race to cut carbon. The concept itself is simple: products must invest in eligible projects to be considered ‘‘green’’ and their environmental impact be assessed and approved on an ongoing basis by a credible, accountable third party – that is it. The market is by no means limited to green bonds – it incorporates everything from carbon-tilted indices to the UK’s rapid adoption of green crowdfunding – but they are amongst the fastest growing asset class in global financial markets and have been adopted by world-renowned corporates, major financial institutions, municipal authorities and multilateral development banks. “ ASSET OWNERS EVERYWHERE – FROM PENSION HOLDERS TO SOVEREIGN WEALTH FUNDS – ARE INCREASINGLY LOOKING FOR SUSTAINABLE INVESTMENTS ”SIR ROGER GIFFORD, CHAIRMAN, THE CITY OF LONDON’S GREEN FINANCE INITIATIVE054 FINANCE AND INVESTMENT