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Europe retains leading role in green finance, but other centers gaining – Z/Yen

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Europe retains leading role in green finance, but other centers gaining – Z/Yen

Europe will need to ensure its regulatory regime is robust if it is to retain its position as the leading region for global green finance activities, according to London-based think tank Z/Yen Group.

Most of the financial centers in Z/Yen's latest Global Green Finance Index are in Europe, with London topping the list and Amsterdam in second place. But other cities such as San Francisco, Beijing and Singapore are moving up in the rankings as more businesses and regulators transition to environmentally friendly operations.

Other regions are "catching up very rapidly, and Europe can't rest on its [laurels]," said Simon Mills, one of the authors of the report accompanying the index, during a webinar. "It needs to keep innovating. It needs to ensure that the regulatory system is one of the best in the world. Otherwise, other people are going to eat [its] lunch."

Europe dominant

The dominance of Europe is "historic" since green finance was "essentially developed within European centers," Mills said. Other locations in the top 10 include Zurich, Luxembourg, Geneva, Stockholm, Oslo and Paris. The Norwegian capital dropped five places in the ranking, while San Francisco and Los Angeles each moved up two places, to third and eight, respectively.

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The index is compiled based on a survey of 776 individuals from financial services companies, regulators and nongovernmental organizations, and quantitative data covering sustainability, business, human capital, infrastructure and other factors.

London's position as the leading green finance center might be partly explained by the fact that the U.K. is hosting the UN Climate Change Conference, or COP26, in Glasgow in early November, Mills said. The British government also issued its inaugural £10 billion green sovereign bond in September, which according to Reuters attracted a demand of more than £100 billion.

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Other regions are boosting their green finance activities. Asia-Pacific centers are performing well, with Beijing, Shanghai, Seoul and Singapore improving their ranking in the index. In North America, besides San Francisco and Los Angeles, New York rose 18 places to number 13.

Drivers

Respondents to the survey were especially interested in green bonds and sustainable infrastructure finance, Mills said. There was also an interest in green insurance, which could reflect the leadership role that insurers have to play in the fight against climate change and related catastrophes, he said.

Interest in academic research is also growing. Mills said it has taken some time for academia to catch up with the leading edge of the green finance community.