Environmental finance
[2] In 1992, Richard L. Sandor proposed a new course outlining emission markets at the University of Chicago Booth School of Business, that would later be known as the course, Environmental Finance.
[4] Prior to this in 1990, Sandor had been involved with the passing of the Clean Air Act Amendment for the Chicago Board of Trade, which aimed to reduce high sulfur dioxide levels following WW2.
Inspired by the theory of social cost, Sandor focused on cap-and-trade strategies such as emission trading schemes and more flexible mechanisms including taxes and subsidies to manage environmental crisis.
[8] Later in 2000, the United Nations introduced the Millennium Development Goal scheme which sought to promote a sustainable framework for large multinational corporations and countries to follow to improve the environmental impact of financial investments.
[9] Funding was targeted to improve areas such as primary education, gender equality, maternal health, and nutrition, with the overall goal of creating beneficial national relationships to decrease the ecological footprint of developing economies[10].
[9] The United Nations Environment Program (UNEP) has had a detailed history in providing infrastructure to improve the environmental effects of financial investments.
Following the Global Financial Crisis beginning in 2007, the UNEP provided substantial support for future sustainable investment choices for economies such as Greece which were impacted severely.
The Act seeks to achieve this goal by reviewing carbon budgeting schemes such emission trading credits, every 5 years to continually reassess and recalibrate relevant policies.
[14] The 2010 cap and trade scheme introduced in the metropolitan regions of Tokyo was mandatory for businesses heavily dependent on fuel and electricity, who accounted for almost 20% of total carbon emissions in the area.
Additionally, the Act seeks to reduce emissions in a manner that will foster economic growth through increased market competition and investment into renewable energy sources.
[18] In 2017 the National Mitigation Plan was passed by the Irish Government which aimed to regress climate change by decreasing emission levels through revised investment strategies and frameworks for power generation, agriculture, and transport The plan involves 106 separate guidelines for short and long term climate change mitigation.
Societal shifts from fossil fuels to renewable energy caused by an increased awareness of climate change has made government bodies and firms re-evaluate investment strategies to avoid irreparable ecological damage.
[21] The initial stage to mitigate climate change through financial tools involves ecological and economic forecasting to model future impacts of current investment methodologies on the environment.
[22] This allows for an approximate estimation of future environments; however, the impacts of continued harmful business trends need to be observed under a non-linear perspective.
When paired with international legislation, such as the case of the Montreal Protocol on Substances that Deplete the Ozone Layer, environmentally based investments have stimulated emerging industries and reduced the consequences of climate change.
Price increases in carbon intensive sectors such as foresting and mining were also expected, incentivising a shift towards renewable energy system and improved investment strategies with a less harmful environmental impact.
Due to the associated increased energy costs, fuel prices rose 2-3 cents per litre over the duration of the cap and trade scheme.
