Many countries are having to spend heavily to weather the economic storm, while also facing the challenge of keeping carbon reduction pledges.
Could “green stimulus” be the answer?
Megan Revell reports.
Can 'green stimulus' help corona-stricken economies?
For European governments battling to brace pummelled economies, there might be no better time to go green.
While environmental focus has somewhat faded, the need to meet carbon pledges hasn’t - and pressure is mounting to design spending around climate change.
The answer may lie in “green bonds”; Raising debt for funding projects such as renewable energy and public transport.
Simon Bond is the director of responsible investment portfolio management at London-based Columbia Threadneedle.
(SOUNDBITE) (English) DIRECTOR OF RESPONSIBLE INVESTMENT PORTFOLIO MANAGEMENT AT COLOMBIA THREADNEEDLE, SIMON BOND, (English), SAYING: "If you're going to spend money on fiscal stimulus, on infrastructure, it should be environmental infrastructure that benefits both the environment and of course as an investment benefits society generally.
" So far governments have been relatively slow to embrace green debt.
Green bonds comprise less than 0.1% of total sovereign debt, according to S&P Global.
(SOUNDBITE) (English) DIRECTOR OF RESPONSIBLE INVESTMENT PORTFOLIO MANAGEMENT AT COLOMBIA THREADNEEDLE, SIMON BOND, (English), SAYING: "The requirements for measurement and to set up these particular types of bonds is probably why some governments have fallen slightly behind the curve.
It does need political will intervention.
It needs measurement.
And that can be a little bit more troublesome for governments." But what about the critics who say green bonds will not be cost-effective, and that investors will have to pay a premium?
(SOUNDBITE) (English) DIRECTOR OF RESPONSIBLE INVESTMENT PORTFOLIO MANAGEMENT AT COLOMBIA THREADNEEDLE, SIMON BOND, (English), SAYING: "We do not believe that you need to pay more for a sovereign green bond, in fact, we've seen that that's not been the case in the past.
We think you can issue effectively the same cost of capital as a normal sovereign bond.
And we've seen this.
I think actually you can have your cake and eat it." Debt agencies say change is on its way.
Germany plans to issue a green bond in the second half of 2020 as does Italy.
Other candidates are Spain, Sweden, Denmark and Britain.
Germany’s debt agency told Reuters its green bond plans would go ahead, despite the current circumstances.