Page 8 - Green Finance 2024

I. Introduction

1.1. History of ‘green finance’ concept

The origins of green finance can be linked to the broader environmental movement that

gained momentum in the 1970s. This period saw the development of increased

awareness of environmental issues such as the first Earth Day in 1970 or the
establishment of environmental regulatory agencies like the U.S. Environmental

Protection Agency (EPA). In academia, the initial concept of sustainable development

was introduced in 1972 and was well embraced as a vision recognizing the

interconnectedness of social, economic, and environmental issues. Then, the concept of

“sustainable development” was developed and popularized by the Brundtland, formally
titled “Our Common Future”, by the World Commission on Environment and

Development, which emphasized the integration of economic development with

environmental sustainability (Brundtland et al., 1987).

During the 1980s and 1990s, the idea that financial markets could be leveraged to
promote environmental sustainability began to take shape. One of the earliest forms of

green finance was the issuance of green bonds, which are designated for funding

environmentally friendly projects. The first green bond was issued by the European

Investment Bank in 2007, although similar concepts had been in use for several years

prior (Flaherty, Gevorkyan, Radpour, & Semmler, 2017).

The 2000s marked a period of significant growth and institutionalization for green

finance. The Kyoto Protocol, which came into effect in 2005, introduced mechanisms

like the Clean Development Mechanism (CDM), which allowed for the creation of

carbon credits. These mechanisms created new financial incentives for investing in green
projects, particularly in developing countries (Nations, 1998). In the academic, research

began to increasingly focus on the relationship between financial markets and

environmental sustainability. For example, Scholtens (2006) explored how banks could

contribute to sustainable development, while Richardson (2002) examined the legal and

policy frameworks needed to support green finance.

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