Mint to Be Green: The Role of Public Banks in Mobilizing Capital Towards a Low Carbon Economy
Continuous and large-scale investment is needed to fund the transition to a low-carbon economy. Given the current fiscal economic climate and the sheer scale of capital required, governments alone do not have the capacity to fund this transition. Instead, as estimated by the UNFCCC, more than 80 percent of the needed capital will be supplied by the private sector. However, there are significant market and investment barriers that deter private investors from financing low-carbon solutions. For this reason, governments must intervene to mobilize private investment towards a low-carbon economy. They can do so through public banks. Public banks have an essential role in enabling a swift transition.
In Europe, public banks have been one of the leading developers, implementers and diffusers of low-carbon financial instruments. As a result, the banks are shaping the course of private investment and accelerating investment flows into socially beneficial as well as profitable activities. By contrast, Canada has a striking institutional gap as it lacks any public banks with even a partial low-carbon mission. This has contributed to a comparatively weak financial and investment sector in terms of low-carbon investment. As such, it is recommended that Canada establish public investment banks, first in key provinces and then at the federal level.