Climate-related financial policy index: A composite index to compare the engagement in green financial policymaking at the global level

Abstract

This study presents a composite index for assessing, quantifying, and comparing international engagement based on evidence that countries have been globally committed – to varying degrees – to climate-related financial policymaking in recent decades. The proposed investigation aims to promote awareness about countries’ global engagement and identify gaps in climate-related financial policy. Using a standardised metric, researchers and policymakers can use the generated climate-related financial policy index (CRFPI) to compare international commitment to climate-related financial policymaking. Emerging economies are the most engaged in green financial policymaking, although they report the highest within-group variability, indicating no standard or general approach to “greening” the financial system. The index demonstrates a location effect, as most jurisdictions with high CRFPIs are in Asia-Pacific and North Europe. Brazil, China, France, Indonesia, and South Korea had the highest scores among G20 countries. After examining several aggregation approaches, the findings appear to be robust overall.

Keywords

• Climate-related financial policies
• Climate risks
• Low-carbon transition
• Financial stability
• Composite index