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FINANCING THE TRANSITIONTwenty-first century capital markets may be defined by their response to climate change. Politicians have played a crucial role in setting the agenda, raising public awareness and – as we have seen at COP21 – building international consensus. NGOs too have long championed a dash toward a carbon-neutral economy, and multilateral authorities like the G20 are consistently putting environmental concerns at the top of their agenda. But the success or failure of these efforts rests ultimately with investors; with those individuals and institutions willing to back new technologies and infrastructure projects, and with the creation of sufficiently deep, liquid and resilient markets for them to access green products and services.  The transition toward green capital markets is now well underway. Green bonds, for example, were first issued in 2007, and sold not because of political pressure or public subsidy but due to rising demand for high-quality, low-carbon assets. They have generated record-breaking issuance volumes since, are worth in excess of US$150 billion globally and are coveted for their value as a hedge against carbon-related risks, as well as their reputation for transparency and integrity. And beyond green bonds and loans, green funds, indices and even crowdfunding platforms are providing the tools to link political conviction with the long-term concerns of institutional investors, and the means for local communities to improve their immediate environs.In short, green finance is one of the best tools available to global policymakers in the race to cut carbon. The concept itself is simple: products must invest in eligible projects to be considered ‘green’ and their environmental impact be assessed and approved on an ongoing basis by a credible, accountable third party – that is it. Such products are now one of the fastest growing asset classes worldwide, and have been adopted by corporates, major financial institutions, municipal authorities and multilateral development banks around the globe. Green products also have the potential to revolutionise infrastructure spending by connecting regional or domestic needs with a ready investor base. Much, if not all, of the world’s infrastructure spending will require green provisions if the Intended Nationally Determined Contributions (INDCs) submitted at COP21 are to be realised, and green bond issuance, for example, could help to finance everything from UK house building and Indian smart cities to the work of the self-labelled ‘lean, clean and green’ Asia Infrastructure and Investment Bank. Put simply, the two-degree ceiling is being taken seriously and financiers are willing to undertake the heavy lifting necessary to meet or even beat it. The City of London Corporation – the body responsible for running London’s Square Mile – believes passionately that this sector represents one of the industry’s best prospects, and in January “LEAVING THE EU DIVESTS THE CITY OF NEITHER ITS PRIORITIES NOR ITS BUSINESS SENSE”SIR ROGER GIFFORD, CHAIRMAN, THE CITY OF LONDON’S GREEN FINANCE INITIATIVEA YEAR ON082 FINANCE AND INVESTMENT