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Definition of green finance

Lindenberg, Nannette
Staff - Other (2014)

Bonn: German Development Institute / Deutsches Institut für Entwicklungspolitik (DIE)


Up to today, we do not have a precise and commonly accepted definition of green finance for two reasons. First, many publications do not try to define the term and second, the definitions that are proposed in the literature vary significantly.

Therefore, this DIE non paper proposes the following definition of green finance:

Green finance comprises

  • the financing of public and private green investments (including preparatory and capital costs) in the following areas
  • environmental goods and services (such as water management or protection of biodiversity and landscapes)
  • prevention, minimization and compensation of damages to the environment and to the climate (such as energy efficiency or dams)
  • the financing of public policies (including operational costs) that encourage the implementation of environmental and environmental-damage mitigation or adaptation projects and initiatives (for example feed-in-tariffs for renewable energies)
  • components of the financial system that deal specifically with green investments, such as the Green Climate Fund or financial instruments for green investments (e.g. green bonds and structured green funds), including their specific legal, economic and institutional framework conditions






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