To curb climate change and accelerate the green transition, finance is pivotal. With pioneering pension funds, asset managers, and public investors, Denmark has long been leading the way in ESG and green financing.
Launched during COP28, a new white paper highlights pathways and partnership models to mobilising investments in the transition to climate-resilient low-carbon economies.
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The following article is foreword to the publication on "Financing the green transition" by Mark Carney UN Special Envoy on Climate Action and Finance.
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Critical action needs to be taken to address the multiple consequences of the climate and biodiversity crises that the world is currently experiencing. Given limitations in government budgets, mobilising private capital is key to closing the gap.
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This white paper provides a comprehensive overview of the global key aspects of financing the green transition. Showcasing prime examples of green financing measures, the publication aims to inspire decision-makers and accelerate the green transition.
Discover the publicationFinancing the green transition stands as one of the paramount challenges of our era. Achieving the goal of limiting global warming to the 1.5°C pathway, outlined in the Paris Agreement, necessitates significant investments on a global scale. According to the 2023 Net Zero Roadmap by the International Energy Agency (IEA), clean energy investments must amount to USD 4.5 bn annually by 2030 to align with this trajectory.
Addressing the investment gap is paramount, especially in times of escalating temperature records, heat waves, floods, droughts, and wildfires. Extreme weather events underscore the urgency, and mobilising substantial financial resources for a globally just and green transition in developing countries presents a global challenge.
The current race extends beyond merely unlocking finance and investments for the green transition. It is equally about ensuring job creation and fostering growth. This becomes increasingly critical given the intensifying global competition to offer companies the most favourable conditions for producing green technologies.
To stay ahead in this race, it is imperative to establish stable and competitive framework conditions. These conditions play a pivotal role in creating attractive hubs for green technology innovation and production, thereby mobilising the necessary finance to sustain these endeavours.
Denmark has extensive experience with financing the green transition, both nationally and internationally. Since the late 1970s, Danish entrepreneurs and innovators as well as changing Danish governments have looked towards developing and promoting green technologies such as renewable energy as well as water and energy efficiency and a move away from fossil energy sources.
There is a need to scale up investment to support several green sectors, such as power, transport and energy systems, industries, buildings, green hydrogen and just transition.
The Danish insurance and pension industry manages EUR 535 billion on behalf of Danish insurance and pension customers. This amount ranks among the world’s largest pension assets relative to the country’s GDP, with approximately two-thirds invested abroad. While the primary objective of pension funds and asset managers is to generate returns for their customers, there is a growing commitment to ensuring that these investments are conducted responsibly and sustainably, addressing Environmental, Social, and Governance (ESG) risks.
Danish pension funds and asset managers have a longstanding tradition of transparency regarding their investments. They have gained recognition for pioneering approaches in channelling customers’ savings into responsible avenues, demonstrating respect for human rights, adhering to climate-related international conventions, and upholding proper governance practices. Although each institutional investor may employ a distinct approach, all Danish pension funds actively support one or more international climate initiatives and alliances, such as the Paris Aligned Investment Initiative, Climate Action 100+, and the Institutional Investors Group on Climate Change.
Moreover, 64% of Danish pension funds currently uphold policies that restrain their involvement in activities related to coal and oil fields, underscoring a collective commitment to environmentally responsible investment practices.
