Could the Green Supporting Factor help mitigate climate change?

Abstract

The need for sustainable finance has grown because of the urgency to mitigate climate change. One proposal to encourage sustainable finance is the Green Supporting Factor, which would make it less costly for entities in the financial sector to finance environmentally sustainable investments. However, it is not clear how well this would incentivise companies in the real economy to ‘greenify’ their investments. Furthermore, the uncertainties and potential adverse effects of the Green Supporting Factor make it an alternative all the less appealing.