Abstract

Financial institutions play a crucial role in advancing global carbon-reduction objectives by mobilizing capital to green investments, managing climate risk, and integrating ESG considerations in financial decisions. This study examines financial institutions' contribution to carbon-reducing objectives globally, concentrating on their function in green investment financing and their inclusion of climate risk in financial decisions. The paper adopts a comparative case study approach to compare green finance development in Europe, Asia, Africa, and America, observing the impact of regional systems of regulation, patterns of investments, and financial instruments. The analysis confirmed that there is a lead in green finance regulation and standardization in Europe, with EU Taxonomy and the European Green Deal guiding green investments. There is a dual reality in Asia, where there is a lead in green bond issuance in China and India, with fragmentation of regulation in other economies and a high reliance on fossil fuels. The analysis also confirmed that there is a high political risk and financing cost in Africa that inhibits access to climate finance, yet multilateral development banks facilitate closing gaps in investments. In America, there is a lead in ESG investing and carbon trading in North America, however, in Latin America, there is a challenge of volatility of economies and inconsistency of policies that inhibits green finance adoption. The analysis indicates that financial institutions should include climate risk in their lending decisions, and policymakers should also harmonize systems of regulation to scale up green finance and tackle climate change globally.