Page 14 - Green Finance 2024

Green Private Equity

Green private equity involves private equity firms investing in companies that produce

environmentally friendly products or services. These investments are often in the form

of venture capital for startups or growth capital for more established companies focusing

on green technologies or practices.

1.3. Challenges and prospects

On the one hand, from academic perspective, we have some challenges associated with

green finance, including:

- Lack of standardization: The field of green finance lacks a common standard,

complicating efforts to consistently define and classify what constitutes environmentally

sustainable finance. The lack of a globally recognized framework makes it difficult for

investors and consumers to distinguish between truly sustainable businesses and those

engaging in greenwashing. Research shows that lack of standardization can lead to
market inefficiencies, where funds may not be allocated to the most effective or worthy

green initiatives (Busch, Bauer, & Orlitzky, 2016). Without clear standards, companies'

green claims can be vague and unverifiable, leading to investor skepticism and hindering

the development of truly green finance initiatives.

- Data availability and risk assessment: Since the first issuance of green bonds in 2008,

green finance has grown significantly. However, data on the efficacy and outcomes of

green finance initiatives remain sparse and fragmented. This scarcity of reliable data

complicates efforts to assess which companies are effectively utilizing green finance for

sustainable development. According to Busch et al. (2016), the ESG data is limited,
making it difficult to assess the true impact of investments and to develop benchmarks

for success. Then, assessing risk in green finance is complicated by the lack of

standardization and the scarcity of data. This results in difficulties in pricing green

finance products accurately, which can deter investors who are unable to adequately the

potential risk and return (Garz & Volk, 2011). Besides, Gianfrate and Peri (2019) shows

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