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Cities vie for crown of world’s top green finance centre as ESG moves mainstream

Amsterdam dethroned Zurich to be ranked the world's top green financial centre in the Global Green Finance Index. (Credit: Unsplash/Giovanna De Martino)

Financial centres in western Europe, which have traditionally coveted the top ten rankings for green finance offerings, face increasing competition from Asia and North America.

What makes a city a leading green financial centre? For the answer, one needs to look no further than the Dutch capital of Amsterdam after the city dethroned the incumbent Zurich to become the world’s top green financial hub.

These are the findings of the Global Green Finance Index (GGFI), a study published by London financial think tank Z/Yen Group, which scores cities according to the “depth and quality of green finance” products and services on offer.

According to the twice-yearly index, Geneva rose two places to rank seventh compared with the previous edition,  behind London, Oslo, San Francisco and Luxembourg. But the margins separating the cities are slim as sustainable finance moves further into the mainstream and competition heats up.

While Western Europe has traditionally led the way in terms of financial products and services, the authors said its crown may be slipping as it faces stiff competition from both North America and the Asia/Pacific regions.

“A number of leading Western European centres may be displaced from the top 10 over the next two or three editions of the GGFI, as North American and Asia/Pacific centres continue to enhance their capabilities in this field,” the report said.

The index shows Asia Pacific centres performed strongly, with Tokyo, Beijing, Sydney, and Singapore all consolidating gains. Meanwhile, in North America, Los Angeles entered the top ten for the first time.

The makings of a green finance centre. Green finance refers to a wide range of products or services, such as green bonds or loans, created to ensure a positive outcome for the environment and society while also generating returns.

Last year saw a deluge of inflows into such products, with governments and corporations raising a record $490bn in selling green, social and sustainability bonds, and further record sums invested in ESG-focused funds.

New government policies and regulatory frameworks, like the EU’s Sustainable Finance Disclosure Regulations, have also continued to be a leading driver in the expansion of the market, and in aiding certain cities to take the lead in their offering of green finance products.

Mike Wardle, director and head of indices at the Z/Yen Group, said:  “We began the index in 2018 looking at the development of green financial centres across the world.”

“The aims of the index are really to help track how financial centres are embedding green finance in their offering and to highlight some of the best practices that we see across the world.”

The findings are based on a year-round survey of people working in the financial service sector across the world, as well as data gathered from over 120 instrumental factors made up of a number of quantitative measures, indices and data sources.

Though Zurich lost its top spot to Amsterdam, the index showed it continued to rank first in terms of the quality of its green finance offering, while Geneva came sixth.

“Green finance continues to grow in popularity. Ratings rose across nearly all centres. And so we can see that in terms of survey responses and in terms of quantitative measures, [the sector] is improving,” Wardle said.

“There is no room for complacency at the top. Western Europe is under pressure from Asia Pacific and North American centres and that is likely to continue to be a trend as China’s move towards a sustainable economy continues.”