The Role of Public Financial Institutions in Reducing CO2 Emissions and Countries' Vulnerability to Climate Risks

Abstract

In this thesis, I study the role of public financial institutions (PFIs) in reducing CO 2 emissions and countries' vulnerability to climate risks. Human activities have resulted in the release of substantial volumes of greenhouse gases (GHG) into the atmosphere since the Industrial Revolution, which are major contributors to climate change (IPCC, 2022). The increasing occurrence of extreme weather events, rising sea levels, and loss of biodiversity due to climate change has not only led to adverse impacts on human lives and livelihood but also resulted in substantial economic losses. Immediate attention and actions from all stakeholders are required to safeguard the future in the face of increasing challenges (Stern, 2022;IPCC, 2022).Finance is closely connected with climate change (Scholtens, 2017;Galaz et al., 2015;Dasgupta, 2021). Financial markets and institutions, as primary capital sources for economic activities, play a dual role in this regard: funding fossil fuels that accelerate climate change and supporting low-carbon and climate-resilient initiatives that help address climate change. Reducing GHG emissions (mitigation) and countries' vulnerability to climate risks (adaptation) require significant investments, which necessitates the integration of climate change factors into every financial decision of corporations, banks, insurers, and investors from both the public and private sectors (Carney, 2021;COP26, 2021;OECD, 2021b). In this thesis, I focus on PFIs -a specific subset of agents within the public sector of the financial system, investigating their attention and actions in addressing climate challenges, exploring how this relates to business and institutional characteristics, and evaluating the climate-related impacts resulting from their operations.The crucial role of finance in addressing climate crisis is recognised in both societal and academic discussions (Hong et al., 2020;Calvet et al., 2022; Public financial institutions have the potential to make substantial contributions to fund a low-carbon and climate-resilient future. This is acknowledged in academic research that reveals the pivotal role of PFIs in climate finance provision (Cochran