Current State of Green Digital Financing and the Associated Challenges

Abstract

Tackling climate change is one of the most significant challenges facing the world. Financing sustainable development has been at the forefront of discussion. The financing gap to achieve the sustainable development goals in developing countries was estimated at several trillions of dollars annually before the pandemic. The need for sustainable rebuilding intensified in the light of the COVID-19 effect. The world’s financial system needs to respond to the short-term collapse in resources of developing countries and provide long-term strategies to build back better following the COVID-19 pandemic. Given the nascent nature of green business models, a lack of data, and other related barriers, green finance is considered too risky and costly by financial service providers. Digitalization has the potential to reduce the cost, and by leveraging the data, streamline the risk assessment of green lending. This chapter explores the current state of green digital financing. We assess the persisting barriers and provide policy recommendations to expand the transformative impact of digitalization in financing the green development agendas of countries.