GARP SCR- Chapter 5: Green and Sustainable Finance: Markets and Instruments Green and Sustainable Finance: Markets and Instruments

Green funds are investment vehicles (such as mutual funds, ETFs, or private equity funds) that channel capital exclusively into projects, companies, or assets promoting environmental sustainability.

Their primary goal is to generate financial returns while also supporting the transition to a low-carbon, climate-resilient economy.

Typical investments include:

Renewable energy (solar, wind, hydro)
Energy efficiency projects
Sustainable agriculture & forestry
Clean transportation (EVs, public transit)
Green buildings & infrastructure

Why they matter:
- Help investors align portfolios with ESG goals.
- Mobilize capital for climate action.
- Reduce exposure to stranded assets in carbon-intensive sectors.

Differentiate between green funds composed exclusively of sustainable finance instruments vs. those using green/ESG indices for selection.
What practical risks remain in both cases?

Sustainable ETFs are rapidly growing, but what structural limitations do they face compared to traditional ETFs like the S&P 500 tracker (SPY)?

Why is there no single universally accepted definition of a ‘sustainable fund’
how does this ambiguity affect regulatory oversight and investor protection?